Exhibit 13
Company Profile: Gannett Co., Inc. is a diversified news and information
company that publishes newspapers, operates broadcasting stations and is engaged
in marketing, commercial printing, a newswire service, data services and news
programming. Gannett is an international company with headquarters in Arlington,
Va., and operations in 43 states, the District of Columbia, Guam, the United
Kingdom, Belgium, Germany, Italy and Hong Kong.
Gannett is the USA's largest newspaper group in terms of circulation. The
company's 99 U.S. daily newspapers have a combined daily paid circulation of 7.8
million. They include USA TODAY, the nation's largest-selling daily newspaper,
with a circulation of approximately 2.3 million. In addition, Gannett owns a
variety of non- daily publications, and USA WEEKEND, a weekly newspaper
magazine.
Newsquest plc, a wholly owned Gannett subsidiary acquired in mid- 1999, is
one of the largest regional newspaper publishers in the United Kingdom with a
portfolio of nearly 300 titles. Its publications include 15 daily newspapers
with a combined circulation of approximately 600,000. Newsquest also publishes a
variety of non-daily publications, including Berrow's Worcester Journal, the
oldest continuously published newspaper in the world.
The company owns and operates 22 television stations covering 17.5 percent
of the USA.
Gannett was founded by Frank E. Gannett and associates in 1906 and
incorporated in 1923. The company went public in 1967. Its more than 264 million
shares of common stock are held by approximately 14,000 shareholders of record
in all 50 states and several foreign countries. The company has approximately
53,400 employees.
Board of Directors
Douglas H. McCorkindale
Chairman, president and chief executive officer, Gannett Co., Inc.
Formerly: President, chief executive officer and vice chairman, Gannett Co.,
Inc. (2000-January 2001), Vice chairman and president, Gannett Co., Inc.
(1997-2000), Vice chairman and chief financial and administrative officer,
Gannett Co., Inc. (1985-1997). Other directorships: Continental Airlines, Inc.;
and funds which are part of the Prudential group of mutual funds. Age 61.
(b,d,e,f,g)
H. Jesse Arnelle
Of counsel to Winston-Salem, N.C., law firm of Womble, Carlyle, Sandridge &
Rice. Other directorships: FPL Group, Inc.; Textron Corporation; Eastman
Chemical Co.; Armstrong World Industries; Waste Management, Inc. Age 67. (a,e)
Meredith A. Brokaw
Founder, Penny Whistle Toys, Inc., New York City, and author of children's
books. Other directorships: Conservation International, Washington, D.C. Age 60.
(b,d,e)
James A. Johnson
Chairman and chief executive officer, Johnson Capital Partners. Other
directorships: Cummins Engine Co.; Goldman Sachs Group, Inc.; Target
Corporation; Temple-Inland Corporation; United Health Group; KB Home
Corporation; Chairman, John F. Kennedy Center for the Performing Arts; Chairman,
board of trustees, The Brookings Institution. Age 57. (b,c,d)
Samuel J. Palmisano
President and chief operating officer, International Business Machines
Corporation; and a trustee of The Johns Hopkins University. Age 49. (a,c)
Karen Hastie Williams
Partner of Washington, D.C., law firm of Crowell & Moring. Other
directorships: The Chubb Corporation; Continental Airlines, Inc.; Washington Gas
Light Company; and a trustee of the Fannie Mae Foundation. Age 56. (a,c)
(a) Member of Audit Committee.
(b) Member of Executive Committee.
(c) Member of Executive Compensation Committee.
(d) Member of Management Continuity Committee.
(e) Member of Public Responsibility and Personnel Practices Committee.
(f) Member of Gannett Management Committee.
(g) Member of Contributions Committee.
A Special Thanks
John J. Curley and Stuart T.K. Ho retired from the board on Jan. 31, 2001.
Curley is the former chairman and chief executive officer, Gannett Co., Inc. Ho
is chairman of the board and president, Capital Investment of Hawaii, Inc.
Josephine P. Louis, chairman and chief executive officer of Eximious, Inc. and
Eximious Ltd., retired on May 2, 2000. Drew Lewis, former chairman and chief
executive officer of Union Pacific Corporation, retired on Nov. 27, 2000.
Company and divisional officers
Gannett's principal management group is the Gannett Management Committee,
which coordinates overall management policies for the company. The Gannett
Newspaper Operating Committee oversees operations of the company's newspaper
division. The Gannett Broadcasting Operating Committee coordinates management
policies for the company's television stations. The members of these three
groups are identified below and on the following pages.
The managers of the company's various local operating units enjoy
substantial autonomy in local policy, operational details, news content and
political endorsements.
Gannett`s headquarters staff includes specialists who provide advice and
assistance to the company's operating units in various phases of the company's
operations.
Below are brief descriptions of the business experience during the last
five years of the officers of the company and the heads of its national and
regional divisions. Officers serve for a term of one year and may be re-elected.
Information about the officer who serves as a director (Douglas H. McCorkindale)
can be found above.
Christopher W. Baldwin
Vice president, taxes. Age 57.
Sara M. Bentley
President, Gannett Northwest Newspaper Group, and president and publisher,
Statesman Journal, Salem, Ore. Age 49.(2)
James T. Brown
Executive chairman, Newsquest. Age 65.
Thomas L. Chapple
Senior vice president, general counsel and secretary. Age 53.(1)
Richard L. Clapp
Senior vice president/human resources. Age 60.(1)
Susan Clark-Johnson
Chairman and CEO, Phoenix Newspapers, Inc., Senior group president, Gannett
Pacific Newspaper Group. Formerly: Senior group president, Gannett Pacific
Newspaper Group, and president and publisher, Reno (Nev.) Gazette-Journal
(1994-2000). Age 54.(2)
Michael J. Coleman
Senior group president, Gannett South Newspaper Group, and president and
publisher, FLORIDA TODAY at Brevard County. Age 57.(2)
Robert T. Collins
President, New Jersey Newspaper Group, and president and publisher, Asbury
Park Press, Home News Tribune, East Brunswick, N.J., and Ocean County
Newspapers. Formerly: President and publisher, Asbury Park Press and Home News
Tribune (1997-1998); president and publisher, Courier-Post, Cherry Hill, N.J.
(1993-1997). Age 57.(2)
Thomas Curley
Senior vice president, administration, and president and publisher, USA
TODAY. Formerly: President and publisher, USA TODAY (1991-1998). Thomas Curley
is the brother of John J. Curley. Age 52.(1)
Philip R. Currie
Senior vice president, news, Newspaper Division. Age 59.(2)
Ardyth R. Diercks
Senior vice president, Gannett Television. Formerly: President and general
manager, KSDK-TV, St. Louis (1996-1998); president and general manager, KVUE-TV,
Austin, Texas (1994-1996). Age 46.(3)
Craig A. Dubow
President, Gannett Television. Formerly: Executive vice president, Gannett
Television (1996-2000); president and general manager, WXIA-TV, Atlanta
(1992-1996). Age 46.(3)
Daniel S. Ehrman, Jr.
Vice president, planning and development. Formerly: Senior vice president,
Gannett Broadcasting (1995-1997). Age 54.
Millicent A. Feller
Senior vice president, public affairs and government relations. Age 53.(1)
Lawrence P. Gasho
Vice president, financial analysis. Age 58.
George R. Gavagan
Vice president and controller. Formerly: Vice president, corporate
accounting services (1993-1997). Age 54.
Denise H. Ivey
President, Gannett Gulf Coast Newspaper Group, and president and publisher,
Pensacola (Fla.) News Journal. Age 50.(2)
John B. Jaske
Senior vice president, labor relations and assistant general counsel. Age 56.(1)
Richard A. Mallary
Senior vice president, Gannett Broadcasting. Age 58.(3)
Gracia C. Martore,
Treasurer and vice president, investor relations. Formerly: Vice president,
treasury services and investor relations (1996-1998); vice president, treasury
services (1993-1996). Age 48.
Myron Maslowsky
Vice president, internal audit. Age 46.
Larry F. Miller
Executive vice president and chief financial officer. Formerly: Senior vice
president, financial planning and controller (1991-1997). Age 62.(1)
Craig A. Moon
President, Piedmont Newspaper Group, and president and publisher, The
Tennessean, Nashville. Formerly: Vice president, Gannett South Newspaper Group,
and president and publisher, The Tennessean (1991-1999). Age 51.(2)
Roger Ogden
Vice president, Gannett Television, and president and general manager,
KUSA-TV, Denver, Colo. Age 55.(3)
W. Curtis Riddle
Senior group president, Gannett East Newspaper Group, and president and
publisher, The News Journal, Wilmington, Del. Age 49.(2)
Carleton F. Rosenburgh
Senior vice president, Gannett Newspaper Division. Age 61.(2)
Gary F. Sherlock
President, Gannett Atlantic Newspaper Group, and president and publisher,
The Journal News, Westchester County, N.Y. Age 55.(2)
Mary P. Stier
Senior group president, Gannett Midwest Newspaper Group, and president and
publisher, The Des Moines Register. Formerly: President, Gannett Midwest
Newspaper Group, and president and publisher, Rockford (Ill.) Register Star
(1993-2000). Age 43.(2)
Wendell J. Van Lare
Vice president, senior labor counsel. Age 55.
Frank J. Vega
President and CEO, Detroit Newspapers. Age 52.(2)
Cecil L. Walker
Chairman and CEO, Gannett Broadcasting Division. Formerly: President and
CEO, Gannett Broadcasting Division (1986-2000). Age 64.(1)(3)
Barbara W. Wall
Vice president, senior legal counsel. Age 46.
Gary L. Watson
President, Gannett Newspaper Division. Age 55.(1)(2)
(1) Member of the Gannett Management Committee.
(2) Member of the Gannett Newspaper Operating Committee.
(3) Member of the Gannett Broadcasting Operating Committee.
Gannett Common stock prices
High-low range by quarters based on NYSE-composite closing prices.
Year Quarter Low High
---- ------- --- ----
1990 First $ 19.75 $ 22.19
Second $ 17.75 $ 21.13
Third $ 14.94 $ 18.75
Fourth $ 15.32 $ 18.88
1991 First $ 17.88 $ 21.32
Second $ 19.88 $ 22.19
Third $ 19.69 $ 23.32
Fourth $ 17.94 $ 21.13
1992 First $ 21.13 $ 23.94
Second $ 20.75 $ 24.57
Third $ 21.94 $ 24.13
Fourth $ 23.00 $ 26.82
1993 First $ 25.32 $ 27.69
Second $ 23.75 $ 27.38
Third $ 23.88 $ 25.69
Fourth $ 23.75 $ 29.07
1994 First $ 26.69 $ 29.19
Second $ 25.32 $ 27.44
Third $ 24.19 $ 25.82
Fourth $ 23.38 $ 26.69
1995 First $ 25.07 $ 27.50
Second $ 26.00 $ 27.88
Third $ 26.50 $ 27.75
Fourth $ 26.44 $ 32.19
1996 First $ 29.63 $ 35.38
Second $ 32.25 $ 35.82
Third $ 32.00 $ 35.07
Fourth $ 34.75 $ 39.25
1997 First $ 35.81 $ 44.75
Second $ 40.50 $ 50.66
Third $ 48.00 $ 53.00
Fourth $ 51.13 $ 61.81
1998 First $ 57.25 $ 69.94
Second $ 65.13 $ 74.69
Third $ 55.81 $ 73.56
Fourth $ 48.94 $ 68.06
1999 First $ 61.81 $ 70.25
Second $ 61.81 $ 75.44
Third $ 66.81 $ 76.94
Fourth $ 68.81 $ 79.31
2000 First $ 61.75 $ 83.25
Second $ 59.25 $ 72.13
Third $ 49.25 $ 60.06
Fourth $ 48.69 $ 63.06
2001 First $ 61.06 $ 67.74*
* Through Feb. 26, 2001
- 22 -
Management's responsibility for financial statements
The management of the company has prepared and is responsible for the
consolidated financial statements and related financial information included in
this report. These financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America. These
financial statements necessarily include amounts determined using management's
best judgments and estimates.
The company's accounting and other control systems provide reasonable
assurance that assets are safeguarded and that the books and records reflect the
authorized transactions of the company. Underlying the concept of reasonable
assurance is the premise that the cost of control not exceed the benefit
derived. Management believes that the company's accounting and other control
systems appropriately recognize this cost/benefit relationship.
The company's independent accountants, PricewaterhouseCoopers LLP,
provide an independent assessment of the degree to which management meets its
responsibility for fairness in financial reporting. They regularly evaluate the
company's system of internal accounting controls and perform such tests and
other procedures as they deem necessary to reach and express an opinion on the
financial statements. The PricewaterhouseCoopers LLP report appears on page 51.
The Audit Committee of the Board of Directors is responsible for reviewing
and monitoring the company's financial reports and accounting practices to
ascertain that they are appropriate in the circumstances. The Audit Committee
consists of three non-management directors, and meets to discuss audit and
financial reporting matters with representatives of financial management, the
internal auditors and the independent accountants. The internal auditors and the
independent accountants have direct access to the Audit Committee to review the
results of their examinations, the adequacy of internal accounting controls and
the quality of financial reporting.
Douglas H. McCorkindale Larry F. Miller
Chairman, President and Executive Vice President
Chief Executive Officer and Chief Financial Officer
Management's discussion and analysis of results of operations and financial
position
Basis of reporting
Following is a discussion of the key factors that have affected the
company's business over the last three fiscal years. This commentary should be
read in conjunction with the company's financial statements, the 11-year summary
of operations and the Form 10-K information that appear in the following
sections of this report.
The company's fiscal year ends on the last Sunday of the calendar year. The
company's 2000 fiscal year ended on Dec. 31, 2000, and encompassed a 53-week
period. The company's 1999 and 1998 fiscal years each encompassed a 52-week
period.
In the fourth quarter of 2000, the company modified its method of
accounting with respect to certain of its newspaper subsidiaries that are
participants in joint operating agencies, in accordance with a pronouncement of
the Financial Accounting Standards Board. Previously, the company included its
pro-rata portion of these revenues and expenses generated by the operation of
the agencies on a line-by-line basis in its statement of income. In fiscal 2000,
the company's operating results from its Detroit and Tucson joint operating
agencies are accounted for under the equity method (as a single net amount which
is in other operating revenue). All prior years' statements of income have been
restated to conform with the new pronouncement. This classification change
within the statements of income has no effect on the company's operating income
or overall reported results of operations. However, this classification change
results in a reduction of reported revenue of approximately $170 million in each
of 2000, 1999, and 1998 with a corresponding reduction in operating expenses.
Business acquisitions, exchanges and dispositions
2000
In May 2000, Gannett made a cash offer to acquire the entire issued and to
be issued share capital of News Communications & Media plc ("Newscom"). Pursuant
to the Offer, Newscom shareholders elected to receive 1800 pence (U.S. $28.44)
per share in cash or Loan Notes, valuing the entire issued share capital of
Newscom at approximately 444 million British pounds (U.S. $702 million). Gannett
also financed the repayment of Newscom's existing debt. On June 5, 2000, the
company concluded the acquisition. With the Newscom acquisition, Newsquest
(which includes Newscom) now publishes nearly 300 titles in the United Kingdom,
including 15 daily newspapers.
- 23 -
On July 21, 2000, the company concluded the acquisition of 19 daily
newspapers as well as numerous weekly and niche publications from Thomson
Newspapers Inc. for an aggregate purchase price of $1.036 billion. The company
acquired eight daily newspapers in Wisconsin, eight daily newspapers in central
Ohio, and daily newspapers in Lafayette, La.; Salisbury, Md.; and St. George,
Utah (collectively, "Thomson").
The company completed its acquisition of Central Newspapers, Inc.
("Central"), on August 1, 2000, for an approximate cash purchase price of $2.6
billion. The company also retired Central's existing debt of approximately $206
million. Central's properties include The Arizona Republic; The Indianapolis
Star; three other dailies in Indiana and one daily in Louisiana; a direct
marketing business; CNI Ventures, an Internet and technology investment
management group; and other related media and information businesses.
In March 2000, the company completed the acquisition of WJXX-TV, the ABC
affiliate in Jacksonville, Fla. Gannett continues to own and operate WTLV-TV,
the NBC affiliate in Jacksonville.
The Newscom, Thomson, Central and WJXX-TV acquisitions were recorded under
the purchase method of accounting. The aggregate purchase price, including
liabilities assumed, for businesses and assets acquired in 2000 including
Newscom, Thomson, Central, the Jacksonville television station and certain
smaller newspaper publishing operations, totaled approximately $4.8 billion.
The sale of the assets of the company's cable division for $2.7 billion was
completed on Jan. 31, 2000. Upon closing, an after-tax gain of approximately
$745 million or $2.77 per diluted share was recognized which, along with the
cable segment operating results, is reported as discontinued operations in the
company's financial statements.
Early in the fourth quarter of 2000, the company contributed the assets of
its newspapers, the Marin Independent Journal and the Classified Gazette, to the
California Newspapers Partnership (a partnership that includes 21 daily
California newspapers) in exchange for an increased ownership interest in the
partnership. The company now has a 19.49% ownership interest in the partnership.
1999
In June 1999, Gannett made a cash offer to acquire the stock of Newsquest
plc ("Newsquest"). Newsquest's principal activities are publishing and printing
regional and local newspapers in England with a portfolio of 180 titles that
includes paid-for daily and weekly newspapers and free weekly newspapers. The
offer was for 460 pence (U.S. $7.26) in cash or loan notes for each of 200.4
million fully diluted shares, for a total price of approximately 922 million
British pounds (U.S. $1.5 billion). Gannett also financed the repayment of
Newsquest's existing debt. In late July 1999, the company concluded the
acquisition, which was recorded under the purchase method of accounting.
In June 1999, the company completed a broadcast station transaction under
which it exchanged its ABC affiliate KVUE-TV in Austin, Texas, and received
KXTV-TV, the ABC affiliate in Sacramento, Calif., plus cash consideration. For
financial reporting purposes, the company recorded the exchange as two
simultaneous but separate events; that is, a sale of its Austin TV station for
which a non-operating gain was recognized and the acquisition of the Sacramento
station accounted for under the purchase method. In its second quarter, the
company reported a net non-operating gain of $55 million ($33 million after tax)
principally as a result of this transaction.
The aggregate purchase price, including liabilities assumed, for businesses
and assets acquired in 1999, including Newsquest, the Sacramento television
station and certain smaller non-daily newspaper publishing operations, totaled
approximately $1.8 billion.
In March 1999, the company contributed The San Bernardino County Sun to the
California Newspapers Partnership in exchange for a partnership interest.
1998
In the first quarter of 1998, the company sold its five remaining radio
stations, its alarm security business and its newspaper in St. Thomas, Virgin
Islands. The company also contributed its newspaper in Saratoga Springs, N.Y.,
to the Gannett Foundation. The company recorded a net non-operating gain of $307
million ($184 million after tax), principally as a result of these transactions.
The company purchased television stations WCSH-TV (NBC) in Portland, Maine,
and WLBZ-TV (NBC) in Bangor, Maine, early in the first quarter and WLTX-TV (CBS)
in Columbia, S.C., in April 1998.
In the third quarter of 1998, the company sold five small-market daily
newspapers in Ohio, Illinois and West Virginia and completed the acquisition of
several newspapers in New Jersey, including The Daily Record in Morristown and
the Ocean County Observer in Toms River. Also in the third quarter of 1998, the
company completed a transaction with TCI Communications, Inc., under which it
exchanged its subscribers and certain cable system assets in the suburban
Chicago area for subscribers and certain cable system assets of TCI in Kansas.
The aggregate purchase price for businesses and assets acquired in 1998 was
approximately $370 million in cash. These acquisitions were accounted for under
the purchase method of accounting.
- 24 -
Results of continuing operations
Note that the company's results of continuing operations discussed below do
not include results from the cable business which was sold in January 2000. All
cable operating results have been reclassified in the statements of income and
related discussions as discontinued operations.
Consolidated summary
Operating earnings reached another record level in 2000. A consolidated
summary of the company's results is presented below. Note that this summary
separates from ongoing results the second quarter 1999 net non-operating gain of
$55 million ($33 million after tax) principally from the exchange of the Austin
television station for the Sacramento television station, and the first quarter
1998 net non-operating gain of $307 million ($184 million after tax) principally
from the sale of radio and alarm security businesses.
In millions of dollars, except per share amounts
2000 Change 1999 Change 1998 Change
---- ------ ---- ------ ---- ------
Operating revenues $ 6,222 22% $ 5,095 8% $ 4,709 9%
Operating expenses $ 4,405 25% $ 3,532 6% $ 3,323 9%
Operating income $ 1,817 16% $ 1,563 13% $ 1,386 10%
Income from
continuing
operations,
excluding gains on
sale/exchange of
properties $ 972 10% $ 886 13% $ 782 15%
After-tax gains
on sale/exchange
of properties $ 33 $ 184
Income from
continuing
operations,
as reported $ 972 6% $ 919 (5%) $ 966 42%
Earnings per share
from continuing
operations,
excluding gains
on sale/exchange
of properties
Basic $ 3.65 15% $ 3.18 15% $ 2.76 15%
Diluted $ 3.63 15% $ 3.15 15% $ 2.74 15%
Earnings per share
from gains on
sale/exchange of
properties
Basic $ .11 $ .65
Diluted $ .11 $ .64
Earnings per share
from continuing
operations, as
reported
Basic $ 3.65 11% $ 3.29 (4%) $ 3.41 42%
Diluted $ 3.63 11% $ 3.26 (4%) $ 3.38 42%
A discussion of operating results of the company's newspaper and
broadcasting segments, along with other factors affecting net income follows.
Operating cash flow amounts presented with business segment information
represent operating income plus depreciation and amortization of intangible
assets. Such cash flow amounts vary from net cash flow from operating activities
presented in the Consolidated Statements of Cash Flows because cash payments for
interest and taxes are not reflected therein, nor are the cash flow effects of
non-operating items, discontinued operations or changes in certain
operations-related balance sheet accounts.
Newspapers
In addition to its domestic local newspapers, the company's newspaper
publishing operations include USA TODAY, USA WEEKEND, Newsquest (including
Newscom operations acquired in 2000), which publishes daily and non-daily
newspapers in the United Kingdom, and Gannett Offset commercial printing. The
newspaper segment in 2000 contributed 87% of the company's revenues and 84% of
its operating income. Record earnings were achieved by the newspaper segment in
2000, reflecting the results from the newly acquired Newscom, Thomson and
Central operations and gains at most other U.S. and Newsquest newspapers.
Newspaper earnings were aided during the first part of 2000 by favorable
newsprint price comparisons. However, the last half of 2000 saw a marked
increase over 1999 prices. For the year, newsprint prices were 3% higher than
1999.
Newspaper operating results were as follows:
In millions of dollars
2000 Change 1999 Change 1998 Change
---- ------ ---- ------ ---- ------
Revenues $5,434 24% $4,367 10% $3,988 11%
Expenses $3,912 27% $3,075 7% $2,879 11%
Operating
income $1,522 18% $1,292 16% $1,109 11%
Operating
cash flow $1,825 22% $1,499 16% $1,294 11%
Newspaper operating revenues: Newspaper operating revenues are derived
principally from advertising and circulation sales, which accounted for 73% and
21%, respectively, of total newspaper revenues in 2000. Ad revenues also include
those derived from advertising placed with newspaper Internet products. Other
newspaper publishing revenues are mainly from commercial printing businesses and
also include earnings from the company's 50% owned joint operating agencies in
Detroit and Tucson. The table below presents these components of reported
revenues for the last three years.
Newspaper publishing revenues, in millions of dollars
2000 Change 1999 Change 1998 Change
---- ------ ---- ------ ---- ------
Advertising $3,973 28% $3,115 12% $2,773 12%
Circulation $1,121 15% $ 971 1% $ 958 6%
Commercial
printing
and other $ 340 21% $ 281 9% $ 257 16%
------ -- ------ -- ------ --
Total $5,434 24% $4,367 10% $3,988 11%
====== == ====== == ====== ==
- 25 -
In the tables that follow, newspaper advertising linage, circulation volume
statistics and related revenue results are presented on a pro forma basis for
newspapers owned at the end of 2000, including the acquired properties from
Newscom, Central and Thomson. The tables and related commentary include the
portion of revenue and linage data for the company's newspapers participating in
joint operating agencies, consistent with prior years.
For Newsquest, advertising and circulation revenues are fully reflected in
the amounts below, as are daily paid circulation volumes. Advertising linage for
Newsquest is not reflected, however.
Advertising revenues, in millions of dollars (pro forma)
2000 Change 1999 Change 1998 Change
---- ------ ---- ------ ---- ------
Local $1,312 1% $1,301 1% $1,287 4%
National $ 792 10% $ 717 13% $ 632 9%
Classified $1,860 4% $1,782 7% $1,662 9%
------ --- ------ --- ------ ---
Total Run-
of-Press $3,964 4% $3,800 6% $3,581 7%
Preprint
and other
advertising $ 693 10% $ 630 8% $ 585 3%
------ --- ------ --- ------ ---
Total ad
revenue $4,657 5% $4,430 6% $4,166 6%
====== === ====== === ====== ===
Advertising linage, in millions of inches, and preprint distribution (pro forma)
2000 Change 1999 Change 1998 Change
---- ------ ---- ------ ---- ------
Local 42.8 (1%) 43.1 1% 42.8 2%
National 4.6 11% 4.1 16% 3.5 6%
Classified 57.3 6% 54.0 9% 49.4 8%
---- --- ---- --- ---- ---
Total Run-
of-Press 104.7 3% 101.2 6% 95.7 5%
===== === ===== === ==== ===
Preprint
distribution
(millions) 10,556 7% 9,869 4% 9,444 6%
====== === ===== === ===== ===
Reported newspaper advertising revenues for 2000 were $858 million greater
than in 1999, a 28% increase, while pro forma revenues presented above reflect a
5% increase. The variance in these two comparisons relates principally to the
full year effect of the Newsquest acquisition in 1999 and the Newscom, Thomson
and Central acquisitions in 2000. Reported and pro forma newspaper revenue
comparisons are positively impacted by the additional 53rd week in 2000.
Pro forma local ad revenues were up 1% with linage down 1% for the full
year. Ad spending by some of the largest retailers declined for the year,
reflecting closings and consolidations. These revenue declines were offset by
revenue increases from small and medium sized advertisers through expanded sales
and marketing efforts.
Pro forma national ad revenues rose 10% with linage up 11%, driven
principally by USA TODAY, which reported a 12% gain in revenues on an 8% linage
gain. National ad revenue growth also was strong in Phoenix and at several other
larger daily newspaper properties.
Pro forma classified revenues in 2000 rose 4% on a 6% linage gain.
Employment ad revenue gains were the strongest, followed by real estate and
automotive. The continued strong economy throughout most of the year and tight
labor market in the United States and the United Kingdom were key factors in
these revenue gains, along with added marketing and sales resources.
Revenues from the company's United Kingdom operations were unfavorably
impacted by the decline in the exchange rate for British pounds during 2000. If
the exchange rate had remained constant year-over-year, pro forma local,
national and classified ad revenues would have increased 2%, 11% and 6%,
respectively.
Advertising and other revenue from Internet activities for the newspaper
segment totaled approximately $62 million in 2000 and $39 million in 1999. The
company has Web sites at nearly all of its newspapers and other operating
properties within the newspaper segment.
In millions, as reported
Newspaper advertising
Year revenues
- ---- --------
1991 $1,747
1992 $1,773
1993 $1,847
1994 $1,982
1995 $2,078
1996 $2,281
1997 $2,480
1998 $2,773
1999 $3,115
2000 $3,973
Looking to 2001, for our domestic newspapers, modest ad revenue and volume
growth is anticipated in most categories depending on the health of the U.S.
economy and the extent of further closings or consolidations within certain key
industries, particularly retail. Changes in national economic levels, consumer
confidence, and unemployment rates and the level of general economic growth will
impact revenues at all of the company's newspapers. Modest price increases are
generally planned at most properties, and the company will continue to expand
and refine marketing and sales efforts. More robust ad revenue growth is
anticipated in 2001 for our Newsquest properties, depending on continued strong
growth in the United Kingdom's economy.
Newspaper circulation revenues rose $150 million or more than 15% in 2000,
due to incremental circulation revenues from the 1999 and 2000 acquisitions. On
a pro forma basis, circulation revenues increased 1% in 2000.
For local newspapers, morning circulation accounts for approximately 78% of
total daily volume, while evening circulation accounts for 22%. On a pro forma
basis, local morning, evening and Sunday circulation volumes declined 1%.
Selected circulation price increases were implemented in 2000 at certain
newspapers. Also during 2000, the Green Bay (Wis.) Press-Gazette converted from
an evening to a morning publication.
USA TODAY's average daily circulation for 2000 rose 0.4% to 2,284,024. USA
TODAY reported an average daily paid circulation of 2,257,774 in the ABC
Publisher's Statement for the six months ended Sept. 24, 2000, a 1% increase
over the comparable period a year ago.
- 26 -
In millions, as reported
Newspaper circulation
Year revenues
- ---- --------
1991 $734
1992 $763
1993 $781
1994 $789
1995 $816
1996 $873
1997 $903
1998 $958
1999 $971
2000 $1,121
The company expects modest circulation revenue growth at most of its
newspaper properties in 2001 with circulation price increases planned at certain
newspapers.
Pro forma circulation volume for the company's local newspapers is
summarized in the table below:
Average net paid circulation volume, in thousands (pro forma)
2000 Change 1999 Change 1998 Change
---- ------ ---- ------ ---- ------
Local
Newspapers:
Morning 4,728 (1%) 4,758 (1%) 4,820 2%
Evening 1,356 (1%) 1,366 (2%) 1,394 (2%)
----- -- ----- -- ----- --
Total daily 6,084 (1%) 6,124 (1%) 6,214 1%
===== == ===== == ===== ==
Sunday 7,154 (1%) 7,260 (2%) 7,375 (1%)
===== == ===== == ===== ==
Reported newspaper advertising revenues for 1999 were $342 million greater
than in 1998, a 12% increase, while pro forma revenues presented above reflect a
6% increase. The variance in these two comparisons relates principally to the
Newsquest properties acquired in July 1999.
Pro forma local ad revenues and linage were up slightly for the full year.
Ad spending by the larger retailers in our markets declined for the year,
reflecting closings and consolidations, but this was mostly offset by greater
revenue from expanded sales and marketing efforts directed toward small- and
medium-sized advertisers.
Pro forma national ad revenues and linage rose 13% and 16%, respectively,
driven principally by USA TODAY, which reported a 19% gain in revenues on a 14%
linage gain. National ad revenue growth also was strong at USA WEEKEND and at
several large daily newspaper properties.
Pro forma classified revenue in 1999 rose 7% on a 9% linage gain.
Employment ad revenue gains were the strongest, followed by automotive and then
real estate. The continued strong economy and the tight labor market were key
factors in these revenue gains, along with added marketing and sales resources.
Newspaper circulation revenues rose $13 million or slightly more than 1% in
1999. Incremental circulation revenues from Newsquest offset declines in
domestic circulation revenue. On a pro forma basis, circulation revenues
remained even.
On a pro forma basis, local morning circulation declined 1%, evening
circulation declined 2% and Sunday circulation declined 2%. Selected circulation
price increases were implemented in 1999 at certain newspapers. During 1999, the
St. Cloud (Minn.) Times and The Daily Journal at Vineland, N.J., converted from
evening to morning publications.
USA TODAY's average daily circulation for 1999 rose 0.1% to 2,274,621. USA
TODAY reported an average daily paid circulation of 2,235,808 in the ABC
Publisher's Statement for the six months ended Sept. 26, 1999, a 1% increase
over the comparable period in 1998.
Reported newspaper advertising revenues for 1998 were $293 million greater
than in 1997, a 12% increase, while pro forma revenues presented above reflect a
6% increase. This reported/pro forma variance relates principally to newspaper
acquisitions in 1998 and 1997.
Pro forma local ad revenues and linage in 1998 rose 4% and 2%,
respectively. Most local newspapers achieved gains in this category,
particularly from medium and smaller accounts. Ad spending by major retailers
was slightly lower in 1998. The overall gains in local revenues were spurred by
the strong economy and enhanced sales and marketing efforts.
Pro forma national ad revenues and linage rose 9% and 6%, respectively, in
1998 fueled principally by USA TODAY, which reported a 12% gain in total ad
revenues and a 9% linage gain. Ad revenue growth at USA TODAY in 1998 followed a
12% gain in 1997 and a 30% gain in 1996.
Pro forma classified revenues in 1998 rose 9% on an 8% linage gain.
Employment advertising revenue gains were the strongest, followed by real estate
and automotive.
Newspaper circulation revenues rose $55 million or 6% in 1998. Incremental
revenue from the newspaper businesses acquired in 1997 and 1998 contributed
significantly to the gains, although most of the company's local newspapers,
along with USA TODAY and USA WEEKEND, reported higher circulation revenue as
well. On a pro forma basis, local morning circulation rose 2%. Average evening
circulation was 2% lower, continuing the national trend. Average Sunday
circulation was 1% lower in 1998.
During 1998, the Battle Creek (Mich.) Enquirer converted from an evening to
a morning publication, and the 10 daily Gannett Suburban Newspapers were
consolidated into one morning and Sunday publication, The Journal News, based in
Westchester County, N.Y.
Selected circulation price increases were implemented in 1998 at certain
newspapers.
USA TODAY's average daily paid circulation for 1998 rose 2% to 2,271,767.
USA TODAY reported an average daily paid circulation of 2,213,255 in the ABC
Publisher's Statement for the six months ended Sept. 27, 1998, a 2% increase
over the comparable period in 1997.
Newspaper operating expense: Newspaper operating costs rose $836 million,
or 27%, in 2000. The increase was primarily due to incremental costs from the
1999 and 2000 acquisitions. Newsprint expense for the year, including the effect
of acquisitions, was 20% higher in 2000. Both consumption and average newsprint
prices were higher by 17% and 3%, respectively. The increase in consumption was
tempered by a large number of newspapers converting to the new 50-inch web width
format. Generally, a conversion from a 54-inch web width to a 50-inch web width
will result in a more than 7% savings in newsprint consumption. Payroll costs
for newspaper operations rose 26% in 2000, primarily due to the newly acquired
properties and the impact of the 53rd week in 2000.
- 27 -
For 2001, newsprint consumption is expected to be significantly higher due
to the full year impact of the 2000 acquisitions. This increase in consumption
in 2001 will be tempered by the full year impact of web width reductions
implemented in 2000 and planned web width reductions for 2001. For 2001,
newsprint prices are expected to be higher than in 2000, particularly in the
first half of the year.
Newspaper operating expenses rose $197 million, or 7%, in 1999. The
increase was caused principally by incremental costs from Newsquest properties
acquired in July 1999. Newsprint expense for the year, including the effect of
acquisitions, was 6% lower than in 1998. While consumption rose nearly 7% (due
principally to Newsquest), average newsprint prices declined 12%.
Payroll costs for newspaper operations rose 10% in 1999, in part because of
the Newsquest acquisition but also because of staffing increases in marketing
and ad sales and modest pay increases.
Newspaper operating expenses rose $276 million or 11% in 1998. The increase
was caused principally by incremental costs from newspaper properties acquired
in 1997 and 1998. Newsprint expense for the year, including the effect of
acquisitions, was 18% higher than in 1997. Both consumption and average prices
were higher by approximately 9%.
Payroll costs for newspaper operations rose 9% in 1998, in part because of
acquired properties but also because of increases in headcount, particularly in
marketing and ad sales, and pay increases.
Newspaper operating income: The company's newspapers produced record
earnings in 2000. Operating profit rose $231 million or 18%. The increases are
due largely to contributions from the Newsquest, Newscom, Thomson and Central
acquisitions. But other U.S. local newspapers reported earnings gains as well.
Newsquest financial results were translated from British pounds to U.S.
dollars using a weighted average rate of $1.50 for 2000, as compared to $1.62 in
1999, which mitigated some of the strong earnings growth.
For 2001, newspaper operating profits are expected to show continued
growth, reflecting full year results for the 2000 acquisitions, modest revenue
gains, strict cost controls and the benefit of further web width reductions to
partially offset higher newsprint prices.
Newspaper operating profit rose $182 million or 16% in 1999. The Newsquest
properties acquired in July 1999 contributed to the profit gain. Earnings were
strong at Detroit, the company's New Jersey Group and at USA WEEKEND. Most of
the company's local U.S. newspapers reported earnings gains. For USA TODAY, 1999
saw operating profit growth. Newsquest financial results were translated from
British pounds to U.S. dollars using a weighted average rate of $1.62 for the
period it was owned in 1999.
Newspaper operating profit rose $107 million or 11% in 1998. While
newspaper properties acquired in 1997 and 1998 contributed significant earnings,
most of the company's local newspapers also reported higher profits. Earnings
gains at Detroit and at USA TODAY were among the strongest.
Broadcasting
The company's broadcasting operations at the end of 2000 included 22
television stations in markets reaching 17.5 percent of U.S. television homes.
Over the last three years, reported broadcasting revenues, expenses,
operating income and operating cash flows were as follows:
In millions of dollars
2000 Change 1999 Change 1998 Change
---- ------ ---- ------ ---- ------
Revenues $789 8% $729 1% $721 3%
Expenses $429 10% $391 4% $377 1%
---- --- ---- --- ---- ---
Operating
income $360 7% $338 (2%) $344 5%
==== === ==== === ==== ===
Operating
cash flow $425 6% $400 (1%) $404 5%
==== === ==== === ==== ===
Total broadcast revenues rose $60 million or 8% for 2000. Revenues were
bolstered by strong political and issue advertising, revenues from the Australia
Olympics on our NBC stations and the impact of the 53rd week in 2000. Local and
national advertising revenues increased 2% and 19%, respectively, over 1999.
Political and issue advertising in key states contributed to the increase in
national revenues.
Reported operating expenses for broadcast were up 10% due to the WJXX-TV
acquisition and the full year impact of the 1999 Austin/Sacramento station
exchange. On a pro forma basis, operating costs were up 7%. Pro forma payroll
was up 6%.
For 2001, television revenues and earnings comparisons versus 2000 levels
will be challenging, as 2000 benefited significantly from the Summer Olympics
and political and issue advertising.
A summary of pro forma revenues for television stations owned at the end of
2000 follows:
Pro forma broadcast revenues, in millions of dollars
2000 Change 1999 Change 1998 Change
---- ------ ---- ------ ---- ------
Revenues $789 8% $732 (1%) $736 6%
- 28-
Total broadcast reported revenues rose $7 million or 1% for 1999. However,
on a pro forma basis, giving effect to the Austin/Sacramento station exchange,
total station revenues were down 1% for the year. Pro forma local revenues rose
5% for the year, while national revenues were down 7%. The decline in national
ad revenue in comparison with 1998 reflects in part revenue gains in 1998 on CBS
stations for the Winter Olympics and on NBC affiliates for the Super Bowl and
the Seinfeld program, and from political and issue advertising.
Reported operating expenses for broadcast were up 4%, reflecting the impact
of the Austin/Sacramento station exchange. On a pro forma basis, operating costs
were down slightly. Pro forma payroll was up 1%.
Total reported broadcasting revenues rose $18 million or 3% in 1998. On a
pro forma basis, broadcasting revenues rose 6% for the year. Pro forma local and
national advertising revenues increased 6% and 9%, respectively, over 1997,
reflecting strong advertising demand for NBC programming (12 company stations
were NBC affiliates) and overall growth in the economy. Advertising revenues
benefited from the Super Bowl broadcast on the company's NBC stations and the
Winter Olympics airing on its CBS stations. Strong political advertising
contributed to the overall revenue growth as well.
Reported operating expenses for broadcast were up 1% for 1998. On a pro
forma basis, operating expenses increased 2%, with payroll costs up 4% and
program costs up 1% over 1997. Operating income in 1998 from broadcasting
reached a record high, climbing $15 million to $344 million. The 5% increase was
the result of continued strong demand for television advertising in most markets
throughout the year and cost controls.
In millions, as reported
Broadcasting
Year revenues
- ---- --------
1991 $357
1992 $371
1993 $397
1994 $407
1995 $466
1996 $687
1997 $704
1998 $721
1999 $729
2000 $789
Consolidated operating expenses
Over the last three years, the company's consolidated operating expenses
were as follows:
Consolidated operating expenses, in millions of dollars
2000 Change 1999 Change 1998 Change
---- ------ ---- ------ ---- ------
Cost of sales $3,057 24% $2,460 4% $2,364 10%
Selling,
general
and admin
expenses $ 972 23% $ 792 12% $ 705 5%
Depreciation $ 195 15% $ 169 3% $ 164 7%
Amortization
of intangible
assets $ 180 63% $ 111 23% $ 90 11%
Cost of sales for 2000 were up $598 million or 24%, reflecting the
full-year effect of the 1999 Newsquest acquisition, increased costs from the
Newscom, Thomson and Central acquisitions and the impact of an extra week in
2000 over 1999. Newsprint expense increased 20% due primarily to a 17% increase
in consumption, principally from acquisitions. Average newsprint prices
increased 3% compared to 1999.
SG&A was up 23% for the year also due primarily to the new businesses
acquired in 1999 and 2000 and the extra week in 2000.
Depreciation expense increased 15% during the year as a result of the
Newsquest, Newscom, Thomson and Central acquisitions. Likewise, amortization of
intangibles rose $70 million or 63% due to the 1999 and 2000 acquisitions.
Cost of sales for 1999 were up $95 million or 4%, reflecting increased
costs from businesses acquired in 1998 and 1999, particularly Newsquest.
Newsprint expense decreased 6% despite a 7% increase in consumption (including
acquisitions). Average newsprint prices dropped 12% as compared to 1998.
SG&A was up 12% for the year due primarily to the Newsquest acquisition and
generally higher newspaper advertising expenses.
Depreciation expense increased 3% during the year as a result of the
Newsquest acquisition. Amortization of intangibles rose $21 million or 23% due
to 1998 and 1999 acquisitions, principally Newsquest.
Cost of sales for 1998 increased $221 million or 10%. Newsprint expense
rose 18% for the year because of a 9% increase in consumption (including
acquisitions) and 9% higher average newsprint prices. Other costs from
businesses acquired in 1997 and 1998 also contributed to this increase.
SG&A rose 5% for 1998, mainly because of incremental newspaper advertising
expenses from properties acquired in 1997 and 1998.
- 29 -
Depreciation expense in 1998 was up 7% from the prior year due to increased
depreciation expense from capital additions and newly acquired properties.
Amortization of intangibles rose $9 million or 11% because of costs associated
with 1997 and 1998 acquisitions.
Payroll and newsprint costs (along with certain other production material
costs), the largest elements of the company's operating expenses, are presented
below, expressed as a percentage of total pre-tax operating expenses.
2000 1999 1998
---- ---- ----
Payroll and employee benefits 44.0% 45.0% 45.1%
Newsprint and other
production material 18.2% 19.2% 21.0%
Non-operating income and expense
Interest expense in 2000 increased $125 million due to significant
commercial paper borrowings to fund the 1999 Newsquest acquisition, the Newscom
acquisition in June 2000, the Thomson and Central acquisitions in the third
quarter of 2000 and share repurchases. Higher interest rates in 2000,
particularly in the second half of the year, also contributed to the increase,
along with the 53rd week in 2000. The daily average commercial paper outstanding
balance was $3.1 billion during 2000 and $1.3 billion during 1999. During the
second half of 2000, the daily average outstanding balance was $4.9 billion. The
weighted average interest rate was 6.5% for 2000 and 5.2% for 1999. The
increase, however, was tempered by the pay-down of commercial paper borrowings
from the net proceeds on the sale of the cable business in the first quarter of
2000 and from operating cash flows. The company's financing activities are
discussed further in the financial position section of this report. Interest
expense in 2001 is expected to be significantly higher than 2000 due to the full
year impact of increased commercial paper borrowings discussed above. Interest
rates have declined significantly in the first quarter of 2001 following actions
by the Federal Reserve Board.
Interest income in 2000 increased $21 million over 1999 due primarily to
interest earned on marketable securities from cable sale proceeds in the first
half of the year. Non-operating expense in 2000 includes costs associated with
minority investments in Internet businesses.
Interest expense for 1999 increased $15 million or 19%, reflecting
significantly increased commercial paper borrowings in the second half of 1999
as a result of the Newsquest acquisition.
Other non-operating income for 1999 includes the second quarter net
non-operating gain of $55 million principally from the exchange of the
television stations discussed above.
Interest expense for 1998 decreased $19 million or 19%, reflecting the
paydown of fixed-rate debt and commercial paper borrowings from operating cash
flow and the proceeds from the sale of certain businesses.
Other non-operating income for 1998 includes the first quarter net
non-operating gain of $307 million principally from the sale of radio and alarm
security businesses.
Provision for income taxes
The company's effective income tax rate for continuing operations was 39.6%
in 2000, 39.8% in 1999 and 40.0% in 1998. The decrease in the effective tax rate
each year reflects lower state taxes and lower taxes on foreign operations.
Income from continuing operations
In 2000, the company reported income from continuing operations of $972
million or $3.63 per diluted share, both record highs, up 10% and 15%,
respectively, from record results in 1999 (excluding the 1999 net non-operating
gain principally from the television station exchange transaction discussed on
page 24).
The company's operating income was $1.817 billion for the year, an increase
of $254 million or 16%. Each of the company's segments reported higher earnings
for the year, with interest expense up $125 million over 1999 as previously
discussed.
In 1999, the company reported income from continuing operations of $919
million or $3.26 per diluted share. However, this reflects the net non-operating
gain principally from the television station exchange transaction discussed on
page 24. This net gain totaled $55 million pre-tax ($33 million after tax or
$.11 per diluted share).
For 1998, the company reported income from continuing operations of $966
million or $3.38 per diluted share. This amount reflects the net non-operating
gain principally from the sale of radio and alarm security businesses in the
first quarter of the year. This net gain totaled $307 million pre-tax ($184
million after tax or $.64 per diluted share).
For purposes of evaluating the company's earnings progress from ongoing
operations, the earnings summary below excludes the effect of these
non-operating gains in 1999 and 1998.
In millions of dollars, except per share amounts
Earnings summary excluding 1999
and 1998 net non-operating gains
2000 Change 1999 Change 1998 Change
---- ------ ---- ------ ---- ------
Operating income $ 1,817 16% $ 1,563 13% $ 1,386 10%
Non-operating
expense
Interest expense (219) 132% (95) 19% (80) (19%)
Other 11 159% 4 - (1) (87%)
------- --- ------- --- ------- ----
Total (208) 130% (91) 12% (81) (25%)
------- --- ------- --- ------- ----
Income before
income taxes 1,609 9% 1,472 13% 1,305 13%
Provision for
income taxes 637 9% 586 12% 523 10%
------- --- ------- --- ------- ----
Income from
continuing
operations $ 972 10% $ 886 13% $ 782 15%
======= === ======= === ======= ====
Earnings per
share from
continuing
operations - diluted $ 3.63 15% $ 3.15 15% $ 2.74 15%
======= === ======= === ======= ====
- 30 -
Excluding non-recurring items, the company's reported earnings from
continuing operations in 1999 were $886 million, a 13% increase with diluted
earnings per share at $3.15, up 15%; operating income reached $1.563 billion, an
increase of $177 million or 13%.
The strong, record showing in operating income and after-tax results for
1999 came from newspapers. Broadcast earnings were down 2%. Interest expense was
19% higher.
Excluding non-recurring items, 1998 income from continuing operations was
$782 million or $2.74 per diluted share, both up 15%. Operating income reached
$1.386 billion, an increase of $124 million or 10%. Both the newspaper and
broadcasting segments reported higher earnings for the year, with record results
at USA TODAY and strong improvement at The Detroit News. Lower interest costs
and a lower effective tax rate also contributed.
In millions
Income from
Year Continuing Operations
- ---- ---------------------
1991 $292
1992 $341**
1993 $389
1994 $455
1995 $457
1996 $503*
1997 $681
1998 $782*
1999 $886*
2000 $972
* Before net non-recurring gains from sale/exchange of businesses
** Before effect of accounting principle changes
Discontinued operations
As part of the Multimedia purchase in 1995, the company acquired cable
television and alarm security operations. In 1998, the company sold its alarm
security business, which had been reported within the cable segment. On Jan. 31,
2000, the company completed the sale of its cable division for $2.7 billion.
Upon closing, an after-tax gain of approximately $745 million or $2.77 per
diluted share was recognized, which along with the cable segment operating
results, are reported as discontinued operations in the company's financial
statements.
After-tax earnings from the cable business for the period it was owned, up
to the date of sale, are also reported as income from discontinued operations
and amounted to $2.4 million or $.01 per diluted share in 2000, $38.5 million or
$.14 per diluted share in 1999 and $33.5 million or $.12 per diluted share in
1998.
Net Income
The company reported net income of $1.719 billion or $6.41 per diluted
share in 2000, which includes after-tax earnings from discontinued operations of
$747 million or $2.78 per diluted share.
Average diluted shares outstanding for 2000 totaled 268,118,000, compared
to 281,608,000 in 1999. Basic shares totaled 266,426,000 for 2000 and
279,048,000 for 1999. The decline in diluted and basic shares outstanding in
2000 is primarily due to the company's repurchase of 14.7 million shares during
the first half of 2000.
The company's return on shareholders' equity, based on earnings from
continuing operations, is presented in the table below.
Return on shareholders' equity (before non-recurring gains and accounting
principle changes) in percentages
Return on
Year shareholders' equity
- ---- --------------------
1991 16.2
1992 21.9
1993 22.3
1994 24.4
1995 23.0
1996 19.8
1997 21.3
1998 21.0
1999 20.6
2000 20.0
The percentage return on equity for 2000, 1999 and 1998 has declined from
the prior years because non-recurring gains from the sale/exchange of businesses
are included in shareholders' equity, but are excluded from the amount of
earnings from continuing operations used in the calculation.
- 31 -
Financial Position
Liquidity and capital resources
- -------------------------------
The principal changes in the company's financial position for 2000 relate
to the sale of the cable business in January 2000 for approximately $2.7
billion, share repurchases totaling $967 million in the first half of 2000 and
the Newscom, Thomson and Central acquisitions, with an aggregate cost of
approximately $4.6 billion, which were funded primarily by commercial paper
borrowings.
Changes in property, plant and equipment in 2000 reflect capital spending
of $351 million plus amounts recorded in connection with the acquisitions in
2000, offset by the sale of cable division assets. The increase in intangible
assets is due to amounts recorded in connection with the 2000 acquisitions with
increases in working capital balances likewise due to the newly acquired
properties, offset by the sale of cable division assets. The increase in
investments and other assets in 2000 is primarily the result of the company's
contribution of the Marin Independent Journal and the Classified Gazette to the
California Newspapers Partnership in exchange for an increased interest in the
partnership.
The company repurchased approximately 14.7 million shares of common stock
at a cost of approximately $967 million in the first half of 2000.
The company's foreign currency translation adjustment, related to Newsquest
(including the newly acquired Newscom properties in June 2000) and reported as
part of shareholders' equity, totaled ($66.4 million), net of tax, at Dec. 31,
2000. This reflects the weakening of the pound against the U.S. dollar since the
Newsquest and Newscom acquisition dates. Newsquest's assets and liabilities were
translated from British pounds to U.S. dollars at the Dec. 31, 2000 exchange
rate of $1.49.
The company's consolidated operating cash flow (defined as operating income
plus depreciation and amortization of intangible assets) totaled $2.193 billion
in 2000 compared to $1.843 billion in 1999 and $1.639 billion in 1998. The
operating cash flow increase of 19% reflects significant operating income growth
for the company's newspaper segment largely due to 1999 and 2000 acquisitions.
The table below presents operating cash flow as a percent of revenue over the
last ten years.
Operating cash flow,
Year as a percent of revenue
- ---- -----------------------
1991 24.2
1992 25.5
1993 27.6
1994 29.0
1995 28.7
1996 30.9
1997 34.7
1998 34.8
1999 36.2
2000 35.2
Working capital, or the excess of current assets over current liabilities,
totaled $128 million at the end of 2000 and $191 million at the end of 1999.
Certain key measurements of the elements of working capital for the last three
years are presented in the following chart:
Working capital measurements
2000 1999 1998
---- ---- ----
Current ratio 1.1-to-1 1.2-to-1 1.2-to-1
Accounts receivable turnover 7.4 7.0 7.2
Newsprint inventory turnover 7.3 7.3 7.5
The company's operations have historically generated strong positive cash
flow, which, along with the company's program of issuing commercial paper and
maintaining bank revolving credit agreements, has provided adequate liquidity to
meet the company's requirements, including those for acquisitions.
The company regularly issues commercial paper for cash requirements and
maintains revolving credit agreements equal to or in excess of any commercial
paper outstanding. The company's commercial paper has been rated A-1 and P-1 by
Standard & Poor's and Moody's Investors Service, respectively. The company's
senior unsecured long-term debt is rated A by Standard & Poor's and A1 by
Moody's Investors Service. The company has a shelf registration statement with
the Securities and Exchange Commission under which up to $1.5 billion of
additional debt securities may be issued. The company's Board of Directors has
established a maximum aggregate level of $7 billion for amounts which may be
raised through borrowings or the issuance of equity securities.
Note 4 to the company's financial statements on page 42 of this report
provides further information concerning commercial paper transactions and the
company's $6.06 billion revolving credit agreements.
The company has a capital expenditure program (not including business
acquisitions) of approximately $335 million planned for 2001, including
approximately $91 million for land and buildings or renovation of existing
facilities, including costs associated with the new USA TODAY and corporate
headquarters facility, which will be completed in the third quarter of 2001,
$223 million for machinery and equipment, and $21 million for vehicles and other
assets. Management reviews the capital expenditure program periodically and
modifies it as required to meet current business needs. It is expected that the
2001 capital program will be funded from operating cash flow.
- 32 -
Capital stock
- -------------
In 2000, the company announced authorizations to repurchase up to $1
billion of its common stock and during 2000, the company repurchased
approximately 14.7 million shares of common stock at a cost of $967 million.
In 1998, the company announced authorizations to repurchase up to $750
million of its company stock. During 1998, the company repurchased a total of
approximately 6 million shares of common stock at a cost of $329 million and in
1999, the company purchased approximately 2.4 million shares of its common stock
at a cost of $163 million. Certain of the shares previously acquired by the
company have been reissued in settlement of employee stock awards.
An employee 401(k) Savings Plan was established in 1990, which includes a
company matching contribution in the form of Gannett stock. To fund the
company's matching contribution, an Employee Stock Ownership Plan (ESOP) was
formed which acquired 2,500,000 shares of Gannett stock from the company for $50
million. The stock purchase was financed with a loan from the company.
The company's common stock outstanding at Dec. 31, 2000, totaled
264,271,861 shares, compared with 277,926,431 shares at Dec. 26, 1999.
Dividends
- ---------
Dividends declared on common stock amounted to $228 million in 2000,
compared with $229 million in 1999, reflecting fewer shares outstanding in 2000,
net of an increase in the dividend rate.
Year Dividends declared per share
- ---- ----------------------------
1991 $ .62
1992 $ .63
1993 $ .65
1994 $ .67
1995 $ .69
1996 $ .71
1997 $ .74
1998 $ .78
1999 $ .82
2000 $ .86
In October 2000, the quarterly dividend was increased from $.21 to $.22 per
share.
Cash dividends Payment date Per share
- ------------------ ------------ ---------
2000 4th Quarter Jan. 2, 2001 $.22
3rd Quarter Oct. 2, 2000 $.22
2nd Quarter July 3, 2000 $.21
1st Quarter April 3, 2000 $.21
1999 4th Quarter Jan. 3, 2000 $.21
3rd Quarter Oct. 1, 1999 $.21
2nd Quarter July 1, 1999 $.20
1st Quarter April 1, 1999 $.20
Effects of inflation and changing prices and other matters
The company's results of operations and financial condition have not been
significantly affected by inflation and changing prices. In all of its principal
businesses, subject to normal competitive conditions, the company generally has
been able to pass along rising costs through increased selling prices. Further,
the effects of inflation and changing prices on the company's property, plant
and equipment and related depreciation expense have been reduced as a result of
an ongoing capital expenditure program and the availability of replacement
assets with improved technology and efficiency.
The company is exposed to foreign exchange rate risk primarily due to its
acquisition of Newsquest, which uses the British pound as its functional
currency which is then translated into U.S. dollars.
Effective Jan. 1, 2001, the company adopted Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS No.133), as amended. Based on the company's current
activities, the adoption of this standard is not expected to have any effect on
the company's results of operations or financial position. At Dec. 31, 2000, the
company is not a party to any material derivative contracts.
Certain factors affecting forward-looking statements
Certain statements in the company's 2000 Annual Report to Shareholders and
its Annual Report on Form 10-K contain forward-looking information. The words
"expect," "intend," "believe," "anticipate," "likely," "will" and similar
expressions generally identify forward-looking statements. These forward-looking
statements are subject to certain risks and uncertainties which could cause
actual results and events to differ materially from those anticipated in the
forward-looking statements.
Potential risks and uncertainties which could adversely affect the
company's ability to obtain these results include, without limitation, the
following factors: (a) increased consolidation among major retailers or other
events which may adversely affect business operations of major customers and
depress the level of local and national advertising; (b) an economic downturn in
some or all of the company's principal newspaper or television markets leading
to decreased circulation or local, national or classified advertising; (c) a
decline in general newspaper readership patterns as a result of competitive
alternative media or other factors; (d) an increase in newsprint or syndication
programming costs over the levels anticipated; (e) labor disputes which may
cause revenue declines or increased labor costs; (f) acquisitions of new
businesses or dispositions of existing businesses; (g) a decline in viewership
of major networks and local news programming; (h) rapid technological changes
and frequent new product introductions prevalent in electronic publishing; (i)
an increase in interest rates; (j) a weakening in the British pound to U.S.
dollar exchange rate; and (k) general economic and business conditions.
- 33 -
Consolidated balance sheets
In thousands of dollars
Dec. 31, 2000 Dec. 26, 1999
------------- -------------
Assets
Current assets
Cash $ 69,954 $ 46,148
Marketable securities, at cost,
which approximates market 123,242 12
Trade receivables (less allowance for
doubtful receivables of $37,465
and $30,694, respectively) 875,363 800,682
Other receivables 56,469 80,753
Inventories 128,321 95,014
Prepaid expenses 48,987 52,613
------------ -----------
Total current assets 1,302,336 1,075,222
------------ -----------
Property, plant and equipment
Land 216,049 182,138
Buildings and improvements 1,101,696 886,655
Cable systems (Note 2) 424,907
Machinery, equipment and fixtures 2,525,182 2,259,362
Construction in progress 292,274 130,850
------------ -----------
Total 4,135,201 3,883,912
Less accumulated depreciation (1,673,802) (1,660,060)
------------ -----------
Net property, plant and equipment 2,461,399 2,223,852
------------ -----------
Intangible and other assets
Excess of acquisition cost over the
value of assets acquired (less
accumulated amortization of
$947,855 and $867,606, respectively) 8,740,804 5,398,227
Investments and other assets (Note 5) 475,872 309,145
------------ -----------
Total intangible and other assets 9,216,676 5,707,372
------------ -----------
Total assets $ 12,980,411 $ 9,006,446
============ ===========
- 34 -
Consolidated balance sheets
In thousands of dollars
Dec. 31, 2000 Dec. 26, 1999
------------- -------------
Liabilities and shareholders' equity
Current liabilities
Accounts payable
Trade $ 455,390 $ 312,277
Other 37,853 36,312
Accrued liabilities
Compensation 144,535 120,581
Interest 4,051 5,230
Other 177,318 145,684
Dividend payable 58,118 58,297
Income taxes (Note 7) 144,599 77,553
Deferred income 152,137 127,844
------------ -----------
Total current liabilities 1,174,001 883,778
Deferred income taxes (Note 7) 274,829 479,547
Long-term debt (Note 4) 5,747,856 2,463,250
Postretirement medical and life
insurance liabilities (Note 6) 403,528 304,400
Other long-term liabilities 276,787 245,825
------------ -----------
Total liabilities 7,877,001 4,376,800
------------ -----------
Shareholders' equity (Notes 4 and 8)
Preferred stock, par value $1:
Authorized, 2,000,000 shares:
Issued, none
Common stock, par value $1: Authorized,
800,000,000 shares and 400,000,000
shares, respectively:
Issued, 324,420,732 shares, as to both years 324,421 324,421
Additional paid-in capital 170,715 153,267
Retained earnings 6,995,965 5,504,810
Accumulated other comprehensive (loss) income (66,274) 25,377
------------ -----------
7,424,827 6,007,875
Less Treasury stock, 60,148,871 shares
and 46,494,301 shares, respectively, at cost (2,307,793) (1,359,263)
Deferred compensation related to ESOP (Note 8) (13,624) (18,966)
------------ -----------
Total shareholders' equity 5,103,410 4,629,646
------------ -----------
Commitments and contingent liabilities (Note 9)
------------ -----------
Total liabilities and shareholders' equity $ 12,980,411 $ 9,006,446
============ ===========
- 35 -
Consolidated statements of income
In thousands of dollars
Fiscal year ended Dec. 31, 2000 Dec. 26, 1999 Dec. 27, 1998
------------- ------------- -------------
Net operating revenues
Newspaper advertising $ 3,972,936 $ 3,115,250 $ 2,773,247
Newspaper circulation 1,120,991 971,114 958,456
Broadcasting 788,767 728,642 721,298
All other 339,624 280,356 256,030
----------- ----------- -----------
Total 6,222,318 5,095,362 4,709,031
----------- ----------- -----------
Operating expenses
Cost of sales and operating expenses,
exclusive of depreciation 3,057,252 2,459,749 2,364,338
Selling, general and administrative
expenses, exclusive of depreciation 971,895 792,421 705,416
Depreciation 195,428 169,460 163,776
Amortization of intangible assets 180,487 110,631 89,687
----------- ----------- -----------
Total 4,405,062 3,532,261 3,323,217
----------- ----------- -----------
Operating income 1,817,256 1,563,101 1,385,814
----------- ----------- -----------
Non-operating income (expense)
Interest expense (219,228) (94,619) (79,412)
Interest income 27,209 5,739 19,318
Other (Note 2) (16,397) 52,966 286,005
----------- ----------- -----------
Total (208,416) (35,914) 225,911
----------- ----------- -----------
Income before income taxes 1,608,840 1,527,187 1,611,725
Provision for income taxes 636,900 607,800 645,300
----------- ----------- -----------
Income from continuing operations 971,940 919,387 966,425
Discontinued operations
Income from the operation of
discontinued operations, net of income taxes
of $1,598, $27,700, and $24,200, respectively 2,437 38,541 33,488
Gain on sale of cable business, net of
income taxes of $889,300 744,700
----------- ----------- -----------
Net income $ 1,719,077 $ 957,928 $ 999,913
=========== =========== ===========
Earnings per share - basic
Earnings from continuing operations $ 3.65 $ 3.29 $ 3.41
Earnings from discontinued operations:
Discontinued operations, net of tax .01 .14 .12
Gain on sale of cable business, net of tax 2.79
----------- ----------- -----------
Net income per share - basic $ 6.45 $ 3.43 $ 3.53
=========== =========== ===========
Earnings per share - diluted
Earnings from continuing operations $ 3.63 $ 3.26 $ 3.38
Earnings from discontinued operations:
Discontinued operations, net of tax .01 .14 .12
Gain on sale of cable business, net of tax 2.77
----------- ----------- -----------
Net income per share - diluted $ 6.41 $ 3.40 $ 3.50
=========== =========== ===========
- 36 -
Consolidated statements of cash flows
In thousands of dollars
Fiscal year ended Dec. 31, 2000 Dec. 26, 1999 Dec. 27, 1998
------------- ------------- -------------
Cash flows from operating activities
Net income $ 1,719,077 $ 957,928 $ 999,913
Adjustments to reconcile net income to
operating cash flows
Discontinued operations, net of tax (747,137) (38,541) (33,488)
Income taxes on sale of cable business (889,300)
Depreciation 195,428 169,460 163,776
Amortization of intangibles 180,487 110,631 89,687
Deferred income taxes (169,290) 21,983 40,105
Other, net, including gains on sales (4,484) (49,269) (360,944)
Decrease (increase) in receivables 39,850 (70,014) (29,732)
(Increase) decrease in inventories (16,091) (7,624) 11,054
Increase (decrease) in accounts payable 8,833 (34,805) (14,777)
Increase in interest and taxes payable 186,133 11,555 7,951
Change in other assets and liabilities, net (1,179) 75,582 96,990
----------- ----------- ---------
Net cash flow from operating activities 502,327 1,146,886 970,535
----------- ----------- ---------
Cash flows from investing activities
Purchase of property, plant and equipment (350,580) (258,443) (244,425)
Payments for acquisitions, net of cash acquired (4,264,214) (1,496,649) (369,804)
Change in other investments (78,531) (10,383) (13,835)
Proceeds from sale of certain assets 2,714,362 38,450 665,001
----------- ----------- ---------
Net cash (used for) provided by investing activities (1,978,963) (1,727,025) 36,937
----------- ----------- ---------
Cash flows from financing activities
Proceeds from (payments of) long-term debt 2,799,161 915,865 (470,207)
Dividends paid (228,391) (226,274) (218,853)
Cost of common shares repurchased (967,242) (163,228) (328,956)
Proceeds from issuance of common stock 21,225 33,681 23,953
----------- ----------- ---------
Net cash provided by (used for) financing activities 1,624,753 560,044 (994,063)
----------- ----------- ---------
Effect of currency exchange rate change (1,081) 68
----------- ----------- ---------
Increase (decrease) in cash and cash equivalents 147,036 (20,027) 13,409
Balance of cash and cash equivalents at beginning of year 46,160 66,187 52,778
----------- ----------- ---------
Balance of cash and cash equivalents at end of year $ 193,196 $ 46,160 $ 66,187
=========== =========== =========
- 37 -
Consolidated statements of changes in shareholders' equity
In thousands of dollars
Fiscal years ended
December 27, 1998,
December 26, 1999
and December 31, 2000
Common Accumulated Deferred
stock Additional other compensation
$1 par paid-in Retained comprehensive Treasury related
value capital earnings income (loss) stock to ESOP Total
--------- --------- ----------- -------- ----------- -------- -----------
Balance: Dec. 28, 1997 $ 324,421 $ 104,366 $ 3,995,712 $ (916,708) $(28,055) $ 3,479,736
--------- --------- ----------- -------- ----------- -------- -----------
Net income, 1998 999,913 999,913
Dividends declared,
1998: $.78 per share (220,718) (220,718)
Treasury stock acquired (328,956) (328,956)
Stock options exercised 4,870 19,285 24,155
Stock issued under
incentive plan (1,255) 3,302 2,047
Tax benefit derived from
stock incentive plans 18,064 18,064
Compensation expense
related to ESOP 5,177 5,177
Tax benefit from ESOP 406 406
--------- --------- ----------- -------- ----------- -------- -----------
Balance: Dec. 27, 1998 $ 324,421 $ 126,045 $ 4,775,313 $(1,223,077) $(22,878) $ 3,979,824
========= ========= =========== ======== =========== ======== ===========
Net income, 1999 957,928 957,928
Foreign currency translation
adjustment, net of taxes of $9,130 $ 14,280 14,280
Unrealized gain on securities,
net of taxes of $7,095 11,097 11,097
Total comprehensive income 983,305
Dividends declared,
1999: $.82 per share (228,781) (228,781)
Treasury stock acquired (163,228) (163,228)
Stock options exercised 7,916 23,490 31,406
Stock issued under
incentive plan (2,154) 3,552 1,398
Tax benefit derived from
stock incentive plans 21,460 21,460
Compensation expense
related to ESOP 3,912 3,912
Tax benefit from ESOP 350 350
--------- --------- ----------- -------- ----------- -------- -----------
Balance: Dec. 26, 1999 $ 324,421 $ 153,267 $ 5,504,810 $ 25,377 $(1,359,263) $(18,966) $ 4,629,646
========= ========= =========== ======== =========== ======== ===========
Net income, 2000 1,719,077 1,719,077
Foreign currency translation
adjustment, net of tax
benefit of $51,555 (80,638) (80,638)
Unrealized loss on securities,
net of reclassification adjustments
during the period, net of tax
benefit of $7,041 (11,013) (11,013)
Total comprehensive income 1,627,426
Dividends declared,
2000: $.86 per share (228,212) (228,212)
Treasury stock acquired (967,242) (967,242)
Stock options exercised 6,467 13,261 19,728
Stock issued under
incentive plan 41 5,451 5,492
Tax benefit derived from
stock incentive plans 10,940 10,940
Compensation expense
related to ESOP 5,342 5,342
Tax benefit from ESOP 290 290
--------- --------- ----------- -------- ----------- -------- -----------
Balance: Dec. 31, 2000 $ 324,421 $ 170,715 $ 6,995,965 $(66,274) $(2,307,793) $(13,624) $ 5,103,410
========= ========= =========== ======== =========== ======== ===========
- 38 -
Notes to consolidated financial statements
Note 1
Summary of significant accounting policies
Fiscal year: The company's fiscal year ends on the last Sunday of the
calendar year. The company's 2000 fiscal year ended on Dec. 31, 2000, and
encompassed a 53-week period. The company's 1999 and 1998 fiscal years each
encompassed 52-week periods.
Consolidation: The consolidated financial statements include the accounts
of the company and its subsidiaries after elimination of all significant
intercompany transactions and profits. Certain prior-year information has been
reclassified to conform with the current year presentation.
Operating agencies: Certain of the company's newspaper subsidiaries are
participants in joint operating agencies. Each joint operating agency performs
the production, sales and distribution functions for the subsidiary and another
newspaper publishing company under a joint operating agreement. Prior to fiscal
2000, the company included its appropriate portion of the revenues and expenses
generated by the operation of the agencies on a line-by-line basis in its
statement of income.
Effective in fiscal 2000, the company modified its method of accounting for
its 50% owned joint operating agencies, in accordance with a pronouncement of
the Financial Accounting Standards Board. The company's operating results in the
Detroit and Tucson joint operating agencies are now accounted for under the
equity method, reported as a single net amount which is in other operating
revenues. All prior years' statements of income have been restated to conform
with the new pronouncement. This classification change within the statements of
income has no effect on the company's operating income or overall reported
results of operations.
Inventories: Inventories, consisting principally of newsprint, printing
ink, plate material and production film for the company's newspaper publishing
operations, are valued at the lower of cost (first-in, first-out) or market.
Property and depreciation: Property, plant and equipment is recorded at
cost, and depreciation is provided generally on a straight-line basis over the
estimated useful lives of the assets. The principal estimated useful lives are:
buildings and improvements, 10 to 40 years; machinery, equipment and fixtures,
four to 30 years. Major renewals and improvements and interest incurred during
the construction period of major additions are capitalized. Expenditures for
maintenance, repairs and minor renewals are charged to expense as incurred.
Excess of acquisition cost over fair value of assets acquired: The excess
of acquisition cost over the fair value of assets acquired represents the cost
of intangible assets at the time operating properties were purchased. In
accordance with Opinion 17 of the Accounting Principles Board of the American
Institute of Certified Public Accountants, the excess acquisition cost of
operating properties arising from acquisitions accounted for as purchases since
Oct. 31, 1970, ($9.63 billion at Dec. 31, 2000) is being amortized generally
over 40 years on a straight-line basis.
Valuation of Long-Lived Assets: The company evaluates the carrying value of
long-lived assets to be held and used, including the excess of acquisition cost
over fair value of assets acquired, whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. The carrying value of
a long-lived asset, including the excess of acquisition cost over fair value of
assets acquired, is considered impaired when the projected undiscounted future
cash flows from the related business unit are less than its carrying value. The
company measures impairment based on the amount by which the carrying value
exceeds the fair market value. Fair market value is determined primarily using
the projected future cash flows discounted at a rate commensurate with the risk
involved. Losses on long-lived assets to be disposed of are determined in a
similar manner, except that fair market values are reduced for the cost to
dispose.
Other assets: The company's television stations are parties to program
broadcast contracts. These contracts are recorded at the gross amount of the
related liability when the programs are available for telecasting. Program
assets are classified as current (as a prepaid expense) or noncurrent (as an
other asset) in the Consolidated Balance Sheets, based upon the expected use of
the programs in succeeding years. The amount charged to expense appropriately
matches the cost of the programs with the revenues associated with them. The
liability for these contracts is classified as current or noncurrent in
accordance with the payment terms of the contracts. The payment period generally
coincides with the period of telecast for the programs, but may be shorter.
Retirement plans: Pension costs under the company's retirement plans are
actuarially computed. The company's policy is to fund costs accrued under its
qualified pension plans.
Postretirement benefits other than pensions: The company recognizes the
cost of postretirement medical and life insurance benefits on an accrual basis
over the working lives of employees expected to receive such benefits.
Income taxes: The company accounts for certain income and expense items
differently for financial reporting purposes than for income tax reporting
purposes. Deferred income taxes are provided in recognition of these temporary
differences.
Per share amounts: The company reports earnings per share on two bases,
basic and diluted. All basic income per share amounts are based on the weighted
average number of common shares outstanding during the year. The calculation of
diluted earnings per share also considers the assumed dilution from the exercise
of stock options and from stock incentive rights.
Foreign currency translation: The income statement of Newsquest (including
Newscom operations acquired in 2000) has been translated to U.S. dollars using
the average currency exchange rates in effect during the relevant period.
Newsquest's balance sheet has been translated using the currency exchange rate
as of the end of the accounting period. The impact of currency exchange rate
changes on the translation of Newsquest's balance sheet is included in
comprehensive income, net of tax, and is classified as accumulated other
comprehensive income (loss) in shareholders' equity.
- 39 -
Use of estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires the use of estimates and
assumptions that affect the reported amount of assets, liabilities, revenues and
expenses. Actual results could differ from these estimates.
Discontinued operations: In connection with the sale of the cable business
in early fiscal 2000, the cable operating results are presented in the
consolidated statements of income and related discussions as discontinued
operations. The cable business (along with the alarm security business sold in
1998) was previously reported as a separate segment by the company.
New accounting pronouncements: Effective Jan. 1, 2001, the company adopted
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" as
amended. Based on the company's current activities, the adoption of this
standard is not expected to have any effect on the company's results of
operations or financial position.
Refer to "Operating agencies" on page 39 for a discussion of changes in the
company's accounting for operating results of its 50% owned joint operating
agencies.
Note 2
Acquisitions, exchanges and dispositions
2000: In May 2000, Gannett made a cash offer to acquire the entire issued
and to be issued share capital of News Communications & Media plc ("Newscom").
Pursuant to the Offer, Newscom shareholders elected to receive 1800 pence (U.S.
$28.44) per share in cash or Loan Notes, valuing the entire issued share capital
of Newscom at approximately 444 million British pounds (U.S. $702 million).
Gannett also financed the repayment of Newscom's existing debt. On June 5, 2000,
the company concluded the acquisition. With the Newscom acquisition, Newsquest
(which includes Newscom) now publishes nearly 300 titles in the United Kingdom,
including 15 daily newspapers.
On July 21, 2000, the company concluded the acquisition of 19 daily
newspapers as well as numerous weekly and niche publications from Thomson
Newspapers Inc., for an aggregate purchase price of $1.036 billion. The company
acquired eight daily newspapers in Wisconsin, eight daily newspapers in central
Ohio, and single daily newspapers in Lafayette, La.; Salisbury, Md.; and St.
George, Utah (collectively, "Thomson").
The company completed its acquisition of Central Newspapers, Inc.
("Central") on August 1, 2000, for an approximate cash purchase price of $2.6
billion. The company also retired Central's existing debt of approximately $206
million. Central's properties include The Arizona Republic; The Indianapolis
Star; three other dailies in Indiana and one daily in Louisiana; a direct
marketing business; CNI Ventures, an Internet and technology investment
management group; and other related media and information businesses.
In March 2000, the company completed the acquisition of WJXX-TV, the ABC
affiliate in Jacksonville, Fla. Gannett continues to own and operate WTLV-TV,
the NBC affiliate in Jacksonville.
The Newscom, Thomson, Central and WJXX-TV acquisitions were recorded under
the purchase method of accounting.
The aggregate purchase price, including liabilities assumed, for businesses
and assets acquired in 2000 including Newscom, Thomson, Central, the
Jacksonville television station and certain smaller newspaper publishing
operations, totaled approximately $4.8 billion, of which $4.4 billion represents
excess of acquisition cost over fair value of assets acquired. The purchase
price allocations for Newscom, Thomson and Central are preliminary. The final
allocations will be based on a complete evaluation of assets acquired and
liabilities assumed.
The sale of the assets of the company's cable division for $2.7 billion was
completed on Jan. 31, 2000. Upon closing, an after-tax gain of approximately
$745 million or $2.77 per diluted share was recognized which, along with the
cable segment operating results, is reported as discontinued operations in the
company's financial statements.
Early in the fourth quarter of 2000, the company contributed the assets of
its newspapers, the Marin Independent Journal and the Classified Gazette, to the
California Newspapers Partnership (a partnership that includes 21 daily
California newspapers) in exchange for an increased ownership interest in the
partnership. The company now has a 19.49% ownership interest in the partnership.
1999: In June 1999, Gannett made a cash offer to acquire the stock of
Newsquest plc ("Newsquest"). Newsquest's principal activities are publishing and
printing regional and local newspapers in England with a portfolio of 180 titles
that include paid-for daily and weekly newspapers and free weekly newspapers.
The offer was for 460 pence (U.S. $7.26) in cash or loan notes for each of 200.4
million fully diluted shares, for a total price of approximately 922 million
British pounds (U.S. $1.5 billion). Gannett also financed the repayment of
Newsquest's existing debt. In late July 1999, the company concluded the
acquisition, which was recorded under the purchase method of accounting.
In June 1999, the company completed a broadcast station transaction under
which it exchanged its ABC affiliate KVUE-TV in Austin, Texas, and received
KXTV-TV, the ABC affiliate in Sacramento, Calif., plus cash consideration. For
financial reporting purposes, the company recorded the exchange as two
simultaneous but separate events; that is, a sale of its Austin TV station for
which a non-operating gain was recognized and the acquisition of the Sacramento
station accounted for under the purchase method. In its second quarter, the
company reported a net non-operating gain of $55 million ($33 million after tax)
principally as a result of this transaction.
- 40 -
The aggregate purchase price, including liabilities assumed, for businesses
and assets acquired in 1999 including Newsquest, the Sacramento television
station and certain smaller non-daily newspaper publishing operations, totaled
approximately $1.8 billion.
In March 1999, the company contributed The San Bernardino County Sun to the
California Newspapers Partnership in exchange for a partnership interest.
1998: In the first quarter of 1998, the company sold its five remaining
radio stations, its alarm security business and its newspaper in St. Thomas,
Virgin Islands. The company also contributed its newspaper in Saratoga Springs,
N.Y., to the Gannett Foundation. The company recorded a net non-operating gain
of $307 million ($184 million after tax), principally as a result of these
transactions.
The company purchased television stations WCSH-TV (NBC) in Portland, Maine,
and WLBZ-TV (NBC) in Bangor, Maine, early in the first quarter and WLTX-TV (CBS)
in Columbia, S.C., in April 1998.
In the third quarter of 1998, the company sold five small-market daily
newspapers in Ohio, Illinois and West Virginia and completed the acquisition of
several newspapers in New Jersey, including The Daily Record in Morristown and
the Ocean County Observer in Toms River. Also in the third quarter of 1998, the
company completed a transaction with TCI Communications, Inc., under which it
exchanged its subscribers and certain cable system assets in the suburban
Chicago area for subscribers and certain cable system assets of TCI in Kansas.
The aggregate purchase price for businesses and assets acquired in 1998 was
approximately $370 million in cash. These acquisitions were accounted for under
the purchase method of accounting.
An unaudited earnings summary of the company's income from continuing
operations, excluding the net non-operating gains in 1999 and 1998 discussed
above, is as follows:
In millions of dollars, except per share amounts (unaudited)
2000 Change 1999 Change 1998 Change
---- ------ ---- ------ ---- ------
Income from
continuing
operations $ 972 10% $ 886 13% $ 782 15%
Earnings per
share from
continuing
operations
- Basic $ 3.65 15% $ 3.18 15% $ 2.76 15%
- Diluted 3.63 15% $ 3.15 15% $ 2.74 15%
The following table summarizes, on an unaudited, pro forma basis, the
estimated combined results of operations of the company and its subsidiaries as
though the fiscal year 2000 and 1999 acquisitions, exchanges and dispositions
noted above were made at the beginning of 1999. On this basis, these
transactions would have resulted in a pro-forma decrease in income per diluted
share from continuing operations for 2000 and 1999 of $.15 and $.12,
respectively (excluding the 1999 net non-operating gain previously discussed).
However, this pro forma combined statement does not necessarily reflect the
results of operations as they would have been if the combined companies had
constituted a single entity during those years.
In millions, except per share amounts (pro forma and unaudited)
Fiscal year 2000 1999
------ ------
Operating revenues* $6,880 $6,598
Income before taxes* $1,543 $1,419
Income* $ 932 $ 854
Income per share* - Basic $ 3.50 $ 3.06
Income per share* - Diluted $ 3.48 $ 3.03
*from continuing operations
Note 3
Statement of cash flows
For purposes of this statement, the company considers its marketable
securities, which are readily convertible into cash (with original maturity
dates of less than 90 days) and consist of short-term investments in government
securities, commercial paper and money market funds, as cash equivalents.
Cash paid in 2000, 1999 and 1998 for income taxes and for interest (net of
amounts capitalized) was as follows:
In thousands of dollars
2000 1999 1998
---- ---- ----
Income taxes $1,454,465 $596,873 $626,409
Interest $ 209,240 $100,547 $ 84,808
The 2000 income taxes paid amount includes amounts paid in connection with
the company's sale of the cable business.
Liabilities assumed in connection with 2000 acquisitions totaled $578
million, with $485 million related to Newscom and Central outstanding debt
obligations. Liabilities assumed in connection with 1999 acquisitions totaled
approximately $365 million, with $181 million related to Newsquest outstanding
debt obligations. Liabilities assumed in connection with 1998 acquisitions
totaled approximately $17 million.
In December 2000, the company issued 118,352 shares of common stock in
settlement of previously granted stock incentive rights for the four year period
1997-2000 and the $6.3 million compensation liability for these rights was
transferred to shareholders' equity. In January following the years ended 1999
and 1998, the company issued 137,168 and 161,646 shares of common stock,
respectively, in settlement of stock incentive rights whose four-year grant
periods ended in December of those years and the compensation liabilities for
those rights, which equaled $6.3 million and $5.5 million, respectively, were
transferred to shareholders' equity.
- 41 -
Note 4
Long-term debt
The long-term debt of the company is summarized below.
In thousands of dollars
Dec. 31, 2000 Dec. 26, 1999
------------- -------------
Unsecured promissory notes $5,461,205 $2,113,763
Notes due 5/1/00, interest at 5.85% -- 249,982
Other indebtedness 286,651 99,505
---------- ----------
Total long-term debt $5,747,856 $2,463,250
========== ==========
The unsecured promissory notes at Dec. 31, 2000, were due from Jan. 4, 2001
to Mar. 23, 2001, with rates varying from 6.4% to 6.63%.
The unsecured promissory notes at Dec. 26, 1999, were due from Dec. 27,
1999, to Jan. 31, 2000, with rates varying from 5.50% to 6.03%.
At Dec. 31, 2000, the unsecured promissory notes were supported by the
$6.06 billion revolving credit agreements discussed below and, therefore, are
classified as long-term debt.
The maximum amount of such promissory notes outstanding at the end of any
period during 2000 and 1999 was $5.7 billion and $2.2 billion, respectively. The
daily average outstanding balance was $3.1 billion during 2000 and $1.3 billion
during 1999. The weighted average interest rate was 6.5% for 2000 and 5.2% for
1999.
Other indebtedness includes the loan notes issued by the company to the
former shareholders of Newsquest plc and Newscom plc in connection with their
acquisitions, as more fully discussed in Note 2. The notes bear interest at .5%
below the London Interbank Offered Rate subject to a cap of 6.75%. Interest is
payable semiannually. The notes are due on Dec. 31, 2006 and Dec. 31, 2007,
respectively, but may be redeemed by the company on each interest payment date.
The remaining other indebtedness at Dec. 31, 2000, has maturities ranging from
2001 to 2013 at interest rates ranging from 5% to 10%.
At Dec. 31, 2000, the company had $6.06 billion of credit available under
two revolving credit agreements. The agreements provide for revolving credit
periods which permit borrowings from time to time to the maximum commitments.
The 1998 $3.0 billion agreement revolving credit period extends to July 1, 2003.
The 2000 $3.06 billion agreement consists of a $1.53 billion 364-day facility
which extends to July 2001 and a $1.53 billion 5-year facility which extends to
July 2005. At the end of the 364-day period, any borrowings outstanding under
the 364-day credit facility are convertible into a 2-year term loan at Gannett's
option.
The commitment fee rate for the 1998 revolving credit agreement may range
from .07% to .175%, depending on Standard & Poor's or Moody's credit rating of
the company's senior unsecured long-term debt. The rate in effect on Dec. 31,
2000 was .09%. At the option of the company, the interest rate on borrowings
under this agreement may be at the prime rate, at rates ranging from .13% to
.35% above the London Interbank Offered Rate or at rates ranging from .255% to
.50% above a certificate of deposit-based rate. The prime rate was 9.5% at the
end of 2000 and 8.5% at the end of 1999. The percentages that apply depend on
Standard & Poor's or Moody's credit rating of the company's senior unsecured
long-term debt.
The commitment fee rates for the 2000 revolving credit agreement may range
from .05% to .09%, depending on Standard & Poor's or Moody's credit rating of
the company's senior unsecured long-term debt. The rates in effect on Dec. 31,
2000, were .05% for the 364-day facility and .07% for the 5-year facility. At
the option of the company, the interest rate on borrowings under this agreement
may be at .13% to .19% above the prime rate, the Eurodollar base rate or the
Federal Funds Effective Rate plus .50%. The percentages that apply depend on
Standard & Poor's or Moody's credit rating of the company's senior unsecured
long-term debt.
The revolving credit agreements contain a restrictive provision that
requires the maintenance of net worth of at least $2.5 billion. At Dec. 31,
2000, and Dec. 26, 1999, net worth was $5.1 billion and $4.6 billion,
respectively.
Approximate annual maturities of long-term debt, assuming that the company
had used the $6.06 billion revolving credit agreements as of the balance sheet
date to refinance existing unsecured promissory notes on a long-term basis, are
as follows:
In thousands of dollars
2001
2002
2003 $ 3,931,205
2004
2005 1,530,000
Later years 286,651
------------
Total $ 5,747,856
============
At Dec. 31, 2000, and Dec. 26, 1999, the company estimates that the amount
reported on the balance sheet for financial instruments, including long-term
debt, cash and cash equivalents, trade and other receivables, and other
long-term liabilities, approximates fair value.
- 42 -
Note 5
Retirement plans
The company and its subsidiaries have various retirement plans, including
plans established under collective bargaining agreements and separate plans for
joint operating agencies, under which substantially all full-time employees are
covered. The Gannett Retirement Plan is the company's principal retirement plan
and covers most U.S. employees of the company and its subsidiaries. Benefits
under the Gannett Retirement Plan are based on years of service and final
average pay. The company's retirement plan assets include marketable securities
such as common stocks, bonds and U.S. government obligations and
interest-bearing deposits. The tables below also include the assets and
obligations of the former Central Newspapers, Inc. Retirement Plan, which was
merged into the Gannett Retirement Plan effective December 31, 2000, and
Newscom's Retirement Plan.
The company's pension costs for 2000, 1999 and 1998 are presented in the
following table:
In thousands of dollars
2000 1999 1998
---- ---- ----
Service cost - benefits earned
during the period $ 61,905 $ 60,834 $ 51,249
Interest cost on benefit
obligation 129,601 103,412 94,171
Expected return on plan assets (194,010) (146,168) (135,484)
Amortization of transition asset (28) (984) (4,226)
Amortization of prior
service credit (9,498) (3,754) (3,773)
Amortization of actuarial (gain) loss (4,306) 1,407 443
--------- --------- ---------
Pension expense
for company-sponsored
retirement plans (16,336) 14,747 2,380
Union and other
pension cost 7,432 5,071 5,357
--------- --------- ---------
Pension cost $ (8,904) $ 19,818 $ 7,737
========= ========= =========
The following table provides a reconciliation of benefit obligations, plan
assets and funded status of the company's retirement plans. The related amounts
that are recognized in the Consolidated Balance Sheets for the company's
retirement plans also are provided.
In thousands of dollars
Dec. 31, 2000 Dec. 26, 1999
------------- -------------
Change in benefit obligation
Net benefit obligation at
beginning of year $ 1,470,403 $ 1,474,411
Service cost 61,905 60,834
Interest cost 129,601 103,412
Plan participants' contributions 6,080 1,947
Plan amendments 253
Actuarial loss (gain) 45,636 (185,452)
Acquisitions/plan mergers 444,522 106,090
Gross benefits paid (111,864) (91,092)
----------- -----------
Net benefit obligation at
end of year $ 2,046,283 $ 1,470,403
----------- -----------
Change in plan assets
Fair value of plan assets at
beginning of year $ 1,763,141 $ 1,470,826
Actual return on plan assets 29,546 264,905
Plan participants' contributions 6,080 1,947
Employer contributions 8,471 5,354
Acquisitions/plan mergers 614,594 111,201
Gross benefits paid (111,864) (91,092)
----------- -----------
Fair value of plan assets at
end of year $ 2,309,968 $ 1,763,141
----------- -----------
Funded status at end of year $ 263,685 $ 292,738
Unrecognized net actuarial gain (6,024) (218,942)
Unrecognized prior service credit (197,324) (35,783)
Unrecognized net transition asset (200) (232)
----------- -----------
Net amount recognized at end of year $ 60,137 $ 37,781
----------- -----------
Amounts recognized in
Consolidated Balance Sheet
Prepaid benefit cost $ 142,807 $ 111,232
Accrued benefit cost $ 82,670 $ 73,451
=========== ===========
The net benefit obligation was determined using an assumed discount rate of
7.625% and 8.0% at the end of 2000 and 1999, respectively. The assumed rate of
compensation increase was 4.5% and 5% at the end of 2000 and 1999, respectively.
The assumed long-term rate of return on plan assets used in determining pension
cost was 10%. Retirement plan assets include 1,242,300 shares of the company's
common stock valued at $78 million and $101 million at the end of 2000 and 1999,
respectively.
- 43 -
Note 6
Postretirement benefits other than pensions
The company provides health care and life insurance benefits to certain
retired employees who meet age and service requirements. The cost of providing
retiree health care and life insurance benefits is actuarially determined and
accrued over the service period of the active employee group.
Postretirement benefit cost for health care and life insurance for 2000,
1999 and 1998 included the following components:
In thousands of dollars
2000 1999 1998
-------- -------- --------
Service cost - benefits earned
during the period $ 5,247 $ 3,796 $ 3,118
Interest cost on net benefit
obligation 19,865 14,901 14,378
Amortization of prior service credit (7,018) (8,478) (5,578)
Amortization of actuarial (gain) loss (240) 20 235
-------- -------- --------
Net periodic postretirement
benefit cost $ 17,854 $ 10,239 $ 12,153
======== ======== ========
The table below provides a reconciliation of benefit obligations and funded
status of the company's postretirement benefit plans:
In thousands of dollars
Dec. 31, 2000 Dec. 26, 1999
------------- -------------
Change in benefit obligation
Net benefit obligation at
beginning of year $ 215,593 $ 238,346
Service cost 5,247 3,796
Interest cost 19,865 14,901
Plan participants' contributions 5,626 4,656
Actuarial loss (gain) 40,801 (28,142)
Acquisitions/plan mergers 102,000 3,392
Gross benefits paid (25,365) (21,356)
--------- ---------
Net benefit obligation at
end of year $ 363,767 $ 215,593
--------- ---------
Change in plan assets
Fair value of plan assets at
beginning of year - -
Employer contributions 19,739 16,700
Plan participants' contributions 5,626 4,656
Gross benefits paid (25,365) (21,356)
--------- ---------
Fair value of plan assets at
end of year - -
--------- ---------
Funded status at end of year $ 363,767 $ 215,593
Unrecognized net actuarial (loss) gain (19,950) 21,519
Unrecognized prior service credit 59,711 67,288
--------- ---------
Accrued postretirement benefit cost $ 403,528 $ 304,400
========= =========
At Dec. 31, 2000, the accumulated postretirement benefit obligation was
determined using a discount rate of 7.625% and a health care cost trend rate of
8% for pre-age 65 benefits, decreasing to 5% in the year 2005 and thereafter.
For post-age 64 benefits, the health care cost trend rate used was 12%,
decreasing to 5% in the year 2005 and thereafter.
At Dec. 26, 1999, the accumulated postretirement benefit obligation was
determined using a discount rate of 8.0% and a health care cost trend rate of
7.5% for pre-age 65 benefits, decreasing to 5% in the year 2005 and thereafter.
For post-age 64 benefits, the health care cost trend rate used was 5.5%,
declining to 5% in the year 2001 and thereafter.
The company's policy is to fund the above-mentioned benefits as claims and
premiums are paid.
The effect of a 1% increase in the health care cost trend rate used would
result in increases of approximately $27 million in the 2000 postretirement
benefit obligation and $2 million in the aggregate service and interest
components of the 2000 expense. The effect of a 1% decrease in the health care
cost trend rate used would result in decreases of approximately $24 million in
the 2000 postretirement benefit obligation and $2 million in the aggregate
service and interest components of the 2000 expense.
- 44 -
Note 7
Income taxes
The provision for income taxes on income from continuing operations
consists of the following:
In thousands of dollars
2000 Current Deferred Total
------- -------- -----
Federal $518,413 $13,414 $531,827
State and other 75,865 1,963 77,828
Foreign 25,041 2,204 27,245
-------- ------- --------
Total $619,319 $17,581 $636,900
======== ======= ========
In thousands of dollars
1999 Current Deferred Total
------- -------- -----
Federal $505,902 $14,791 $520,693
State and other 72,927 2,132 75,059
Foreign 10,863 1,185 12,048
-------- ------- --------
Total $589,692 $18,108 $607,800
======== ======= ========
In thousands of dollars
1998 Current Deferred Total
------- -------- -----
Federal $528,800 $31,144 $559,944
State and other 80,609 4,747 85,356
-------- ------- --------
Total $609,409 $35,891 $645,300
======== ======= ========
In addition to the income tax provision presented above for continuing
operations, the company also recorded federal and state income taxes payable on
discontinued operations of $891 million in 2000, $28 million in 1999 and $24
million in 1998.
The provision for income taxes on continuing operations exceeds the U.S.
federal statutory tax rate as a result of the following differences:
Fiscal year 2000 1999 1998
---- ---- ----
U.S. statutory tax rate 35.0% 35.0% 35.0%
Increase in taxes resulting from:
State/other income taxes net
of federal income tax benefit 3.1 3.2 3.5
Goodwill amortization not
deductible for tax purposes 2.2 1.7 1.9
Other, net (0.7) (0.1) (0.4)
---- ---- ----
Effective tax rate 39.6% 39.8% 40.0%
==== ==== ====
Deferred income taxes reflect temporary differences in the recognition of
revenue and expense for tax reporting and financial statement purposes.
Deferred tax liabilities and assets were composed of the following at the
end of 2000 and 1999:
In thousands of dollars
Dec. 31, 2000 Dec. 26, 1999
------------- -------------
Liabilities
Accelerated depreciation $ 341,786 $ 403,846
Accelerated amortization of
deductible intangibles 117,302 114,547
Pension 26,858 15,085
Other 109,963 148,258
--------- ---------
Total deferred tax liabilities 595,909 681,736
--------- ---------
Assets
Accrued compensation costs (75,411) (63,095)
Postretirement medical and life (157,737) (118,310)
Other (87,932) (20,784)
--------- ---------
Total deferred tax assets (321,080) (202,189)
--------- ---------
Net deferred tax liabilities $ 274,829 $ 479,547
========= =========
- 45 -
Note 8
Capital stock, stock options, incentive plans
The company's earnings per share from continuing operations (basic and
diluted) for 2000, 1999 and 1998 are presented below:
In thousands, except per share amounts
2000 1999 1998
---- ---- ----
Income from continuing
operations $971,940 $919,387 $966,425
Weighted average number
of common shares
outstanding (basic) 266,426 279,048 283,097
Effect of dilutive securities
Stock options 1,557 2,217 2,197
Stock incentive rights 135 343 417
Weighted average number
of common shares
outstanding (diluted) 268,118 281,608 285,711
Earnings per share from
continuing operations (basic) $ 3.65 $ 3.29 $ 3.41
Earnings per share from
continuing operations (diluted) $ 3.63 $ 3.26 $ 3.38
The 2000, 1999 and 1998 diluted earnings per share amounts exclude the
effects of 5,366,310, 3,150,090 and 2,500,210 stock options outstanding,
respectively, as their inclusion would be antidilutive.
In 1998, the Board authorized the company to repurchase up to $750 million
of company stock. In 2000, the Board approved an authorization for the company
to repurchase up to $1 billion in additional common stock. The company purchased
approximately 6 million shares of common stock in 1998 for $329 million,
approximately 2.4 million shares in 1999 for $163 million, and approximately
14.7 million shares in 2000 for $967 million.
In May 2000, the company's shareholders approved an amendment to the
company's certificate of incorporation to increase the authorized number of
shares to 802,000,000, of which 800,000,000 shares shall be common stock and
2,000,000 shares shall be preferred stock, both with a $1 par value.
The company's 1978 Executive Long-Term Incentive Plan (the Plan) provides
for the granting of stock options, stock incentive rights and option surrender
rights to executive officers and other key employees. The Plan restricts the
granting of options to any participant in any fiscal year to no more than
350,000 shares of common stock and the exercise period for any stock options
presently issued under the Plan is 10 years after the date of the grant thereof.
The Plan provides that shares of common stock subject to a stock option or other
award that is canceled or forfeited again be available for issuance under the
Plan.
Stock options are granted to purchase common stock of the company at not
less than 100% of the fair market value on the day the option is granted. The
exercise period is eight years for options granted prior to Dec. 10, 1996, and
10 years for options granted on or subsequent to that date. The options become
exercisable at 25% per year after a one-year waiting period.
In December 2000, the company elected not to grant stock incentive rights.
These rights entitled employees to receive one share of common stock at the end
of a four-year incentive period conditioned on the employees' continued
employment with the company. In lieu of receiving stock incentive rights,
employees may receive stock options. Previously granted stock incentive rights
will continue to mature over their original four-year term.
Under the Plan, all outstanding awards will be vested if there is a change
in control of the company. Stock options become 100% exercisable immediately
upon a change in control. Option surrender rights have been awarded, which
relate one-for-one to all outstanding stock options. These rights are effective
only upon a change in control and entitle the employee to receive cash for
option surrender rights equal to 100% of the difference between the exercise
price of the related stock option and the change-in-control price (which is the
highest price paid for a share of stock as part of the change in control). The
Plan also provides for the payment in cash of the value of stock incentive
rights based on the change-in-control price.
- 46 -
A summary of the status of the company's stock option and stock incentive
rights awards as of Dec. 31, 2000, Dec. 26, 1999, and Dec. 27, 1998, and changes
thereto during the years then ended is presented below:
2000 Stock Option Activity Weighted
average
Shares exercise price
------ --------------
Outstanding at beginning of year 12,406,841 $ 52.57
Granted 5,714,830 55.07
Exercised (846,478) 30.18
Canceled (507,380) 64.44
Outstanding at end of year 16,767,813 54.19
Options exercisable at year end 7,478,604 45.85
Weighted average fair value of
options granted during the year $ 19.63
1999 Stock Option Activity Weighted
average
Shares exercise price
------ --------------
Outstanding at beginning of year 10,572,736 $ 43.59
Granted 3,180,365 74.21
Exercised (1,158,304) 30.04
Canceled (187,956) 52.47
Outstanding at end of year 12,406,841 52.57
Options exercisable at year end 6,236,725 38.43
Weighted average fair value of
options granted during the year $ 25.04
1998 Stock Option Activity Weighted
average
Shares exercise price
------ --------------
Outstanding at beginning of year 9,234,421 $ 36.00
Granted 2,514,210 65.00
Exercised (931,604) 26.91
Canceled (244,291) 40.49
Outstanding at end of year 10,572,736 43.59
Options exercisable at year end 5,365,913 31.93
Weighted average fair value of
options granted during the year $ 17.32
Further information about stock options outstanding at Dec. 31, 2000,
follows:
Weighted
average Weighted Weighted
Range of Number remaining average Number average
exercise outstanding contractual exercise exercisable exercise
prices at 12/31/00 life (yrs) price at 12/31/00 price
- ------ ----------- ---------- ------ ----------- ------
$23-28 1,428,658 2.5 $ 25.56 1,428,658 $ 25.56
32-38 2,934,780 5.8 $ 35.18 2,934,780 $ 35.18
41-49 31,460 7.0 $ 46.17 31,460 $ 46.17
50-60 7,006,605 9.5 $ 55.84 1,098,319 $ 59.50
61-68 2,396,295 9.0 $ 64.93 1,181,048 $ 64.97
70-75 2,970,015 9.9 $ 74.28 804,339 $ 74.09
---------- ---- ------- --------- -------
16,767,813 8.2 $ 54.19 7,478,604 $ 45.85
========== ==== ======= ========= =======
Stock Incentive Rights
As discussed above, the company elected not to grant stock incentive rights in
December 2000. Awards made earlier in 2000, and in 1999 and in 1998 were as
follows:
2000 1999 1998
---- ---- ----
Awards granted 10,700 169,290 168,785
Awards for 1998 are for the four-year period 1999-2002. Awards for 1999 and
2000 are for the four-year period 2000-2003.
In December 2000, 118,352 shares of common stock were issued in settlement
of previously granted stock incentive rights for the incentive period ended
December 2000.
Shares available: Shares available for future grants under the Plan totaled
11,721,088 at Dec. 31, 2000.
Pro forma results: SFAS No. 123, "Accounting for Stock-Based Compensation,"
establishes a fair value-based method of accounting for employee stock-based
compensation plans and encourages companies to adopt that method. However, it
also allows companies to continue to apply the intrinsic value-based method
currently prescribed under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25). The company has chosen to
continue to report stock-based compensation in accordance with APB 25, and
provides the following pro forma disclosure of the effects of applying the fair
value method to all applicable awards granted. Under APB Opinion 25 and related
Interpretations, no compensation cost has been recognized for its stock options.
The compensation cost that has been charged against income for its stock
incentive rights was $6.5 million for 2000, $8 million for 1999 and $7 million
for 1998. Those charges were based on the grant price of the stock incentive
rights recognized over the four-year earnout periods. Had compensation cost for
the company's stock options been determined based on
- 47 -
the fair value at the grant date for those awards as permitted (but not
required) under the alternative method of SFAS No. 123, the company's results of
operations and related per share amounts would have been reduced to the pro
forma amounts indicated below:
In thousands, except per share amounts
2000 1999 1998
---- ---- ----
Net income
As reported $ 1,719,077 $ 957,928 $ 999,913
Pro forma $ 1,693,339 $ 942,733 $ 991,385
Income from
continuing operations
As reported $ 971,940 $ 919,387 $ 966,425
Pro forma $ 946,202 $ 904,192 $ 957,897
Net income per share - basic
As reported $ 6.45 $ 3.43 $ 3.53
Pro forma $ 6.36 $ 3.38 $ 3.50
Net income per share - diluted
As reported $ 6.41 $ 3.40 $ 3.50
Pro forma $ 6.32 $ 3.35 $ 3.47
Income from continuing
operations per share - basic
As reported $ 3.65 $ 3.29 $ 3.41
Pro forma $ 3.55 $ 3.24 $ 3.38
Income from continuing
operations per share - diluted
As reported $ 3.63 $ 3.26 $ 3.38
Pro forma $ 3.53 $ 3.21 $ 3.35
The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 2000, 1999 and 1998, respectively: dividend yield
of 1.26%, 1.38%, and 1.69%; expected volatility of 27.04%, 22.31% and 20.62%;
risk-free interest rates of 5.63%, 6.34% and 4.66%; and expected lives of seven
years each.
SFAS No. 123 applies to stock compensation awards granted in fiscal years
that began after Dec. 15, 1994. Options are granted by the company primarily in
December and begin vesting over a four-year period. Options granted in December
1995 and thereafter are subject to the pronouncement. To calculate the pro forma
amounts shown above, compensation cost was recognized over the four-year period
of service during which the options will be earned. As a result, options granted
in December of each year (beginning with December 1995) impact pro forma amounts
for following years but not the year in which they were granted.
401(k) Savings Plan
In 1990, the company established a 401(k) Savings Plan. Most employees of
the company (other than those covered by a collective bargaining agreement) who
are scheduled to work at least 1,000 hours during each year of employment are
eligible to participate in the Plan. Employees may elect to save up to 15% of
compensation on a pre-tax basis subject to certain limits. The company matches
with company common stock to 50% of the first 6% of employee contributions. To
fund the company's matching contribution, an Employee Stock Ownership Plan
(ESOP) was formed in 1990 which acquired 2,500,000 shares of Gannett stock from
the company for $50 million. The stock purchase was financed with a loan from
the company, and the shares are pledged as collateral for the loan. The company
makes monthly contributions to the ESOP equal to the ESOP's debt service
requirements less dividends. All dividends received by the ESOP are used to pay
debt service. As the debt is paid, shares are released as collateral and are
available for allocation to participants.
The company follows the shares allocated method in accounting for its ESOP.
The cost of shares allocated to match employee contributions or to replace
dividends that are used for debt service are accounted for as compensation
expense. The cost of unallocated shares is reported as deferred compensation in
the financial statements. The company, at its option, may repurchase shares from
employees who leave the Plan. The shares are purchased at fair market value, and
the difference between the original cost of the shares and fair market value is
expensed at the time of purchase. All of the shares initially purchased by the
ESOP are considered outstanding for earnings per share calculations. Dividends
on allocated and unallocated shares are recorded as reductions of retained
earnings.
Compensation expense for the 401(k) match and repurchased shares was $9.1
million in 2000, $8.9 million in 1999 and $7.3 million in 1998. The ESOP shares
as of the end of 2000 and 1999 were as follows:
2000 1999
---- ----
Allocated shares 1,825,911 1,559,218
Shares released for allocation 44,332 44,812
Unreleased shares 629,757 895,970
Shares distributed to terminated participants (72,337) (53,563)
--------- ---------
ESOP shares 2,427,663 2,446,437
========= =========
- 48 -
In May 1990, the Board of Directors declared a dividend distribution of one
Preferred Share Purchase Right ("Right") for each common share held, payable to
shareholders of record on June 8, 1990. The Rights become exercisable when a
person or group of persons acquires or announces an intention to acquire
ownership of 15% or more of the company's common shares. Holders of the Rights
may acquire an interest in a new series of junior participating preferred stock,
or they may acquire an additional interest in the company's common shares at 50%
of the market value of the shares at the time the Rights are exercised. The
Rights are redeemable by the company at any time prior to the time they become
exercisable, at a price of $.01 per Right.
In May 2000, the company announced that its Board of Directors approved an
amendment to its Shareholder Rights Plan to extend the expiration date of the
Rights to May 31, 2010 and increase the initial exercise price of each preferred
stock purchase right to $280.
In November 1999, the Board authorized 2,000,000 shares of common stock to
be registered in connection with a savings related share option plan, available
to eligible employees of Newsquest.
Note 9
Commitments and contingent liabilities
Litigation: The company and a number of its subsidiaries are defendants in
judicial and administrative proceedings involving matters incidental to their
business. The company's management does not believe that any material liability
will be imposed as a result of these matters.
Leases: Approximate future minimum annual rentals payable under
non-cancelable operating leases are as follows:
In thousands of dollars
2001 $ 49,689
2002 33,738
2003 29,694
2004 24,986
2005 22,999
Later years 80,300
--------
Total $241,406
========
Total minimum annual rentals have not been reduced for future minimum
sublease rentals aggregating approximately $8 million. Total rental costs
reflected in continuing operations were $62 million for 2000, $48 million for
1999 and $43 million for 1998.
Program broadcast contracts: The company has commitments under program
broadcast contracts totaling $92.3 million for programs to be available for
telecasting in the future.
The company presently owns a 64% interest in WKYC-TV and National
Broadcasting Company (NBC) owns a 36% interest. In December 1998, the company
entered into a Put-Call agreement with NBC which later was amended. Terms of the
agreement permit (but don't require) either party to initiate a purchase/sale of
some or all of NBC's shares in WKYC-TV over a six-year period. A put was made by
NBC in each of April 1999 and December 2000 whereby Gannett acquired an
additional 7% and 6%, respectively of WKYC shares. The company's maximum
aggregate remaining potential commitment under the agreement is approximately
$156 million.
In December 1990, the company adopted a Transitional Compensation Plan
("Plan") which provides termination benefits to key executives whose employment
is terminated under certain circumstances within two years following a change in
control of the company. Benefits under the Plan include a severance payment of
up to three years' compensation and continued life and medical insurance
coverage.
- 49 -
Note 10
Business operations and segment information
The company has determined that its reportable segments based on its
management and internal reporting structure are newspaper publishing, which is
the largest segment of its operations; and secondly, broadcasting (television).
As discussed in Note 2, the cable division's operating results, identifiable
assets and capital expenditures have been retroactively excluded from the
segment data presented herein as the division has been reclassified in the
statements of income and related discussions as discontinued operations.
The newspaper segment at the end of 2000 consisted of 99 U.S. daily
newspapers in 40 states and one U.S. territory, including USA TODAY, a national,
general-interest daily newspaper; and USA WEEKEND, a magazine supplement for
newspapers. The newspaper segment also includes Newsquest (including Newscom,
acquired in 2000) which is a regional newspaper publisher in the United Kingdom
with a portfolio of about 300 titles that includes 15 paid-for daily newspapers,
paid-for weekly newspapers, free weekly newspapers and other publications. The
newspaper segment in the U.S. also includes over 300 non-daily publications, a
nationwide network of offset presses for commercial printing and several smaller
businesses. Newsprint, which is the principal product used in newspaper
publishing, has been and may continue to be subject to significant price changes
from time to time.
As discussed in Note 1, the company modified its method of accounting for
its 50% owned joint operating agencies in Detroit and Tucson to the equity
method of accounting (as a single net amount which is in other operating revenue
for the newspaper segment). All prior years have been restated. This
classification change within the statements of income has no effect on the
company's operating income or overall reported results of operations. However,
this change results in a reduction of reported revenue of approximately $170
million in 2000, 1999 and 1998 with a corresponding reduction in operating
expenses.
The broadcasting segment's activities for 2000 include the operation of 22
U.S. television stations reaching 17.5 percent of U.S. television homes.
The company's foreign revenues in 2000 and 1999 totaled approximately $674
million and $239 million, respectively, principally from publications
distributed in the United Kingdom. The company's long-lived assets in foreign
countries totaled approximately $2.4 billion at Dec. 31, 2000, principally in
the United Kingdom.
Separate financial data for each of the company's business segments is
presented in the table which follows. The accounting policies of the segments
are those described in Note 1. The company evaluates the performance of its
segments based on operating income and operating cash flow. Operating income
represents total revenue less total operating expenses, including depreciation
and amortization of intangibles. In determining operating income by industry
segment, general corporate expenses, interest expense, interest income, and
other income and expense items of a non-operating nature are not considered, as
such items are not allocated to the company's segments. Operating cash flow
represents operating income plus depreciation and amortization of intangible
assets. Corporate assets include cash and marketable securities, certain
investments, long-term receivables and plant and equipment primarily used for
corporate purposes. Interest capitalized has been included as a corporate
capital expenditure for purposes of segment reporting.
In thousands of dollars
Business segment financial information
2000 1999 1998
---- ---- ----
Operating revenues
Newspaper publishing $ 5,433,551 $ 4,366,720 $ 3,987,733
Broadcasting 788,767 728,642 721,298
------------ ----------- -----------
$ 6,222,318 $ 5,095,362 $ 4,709,031
============ =========== ===========
Operating income
Newspaper publishing $ 1,522,350 $ 1,291,665 $ 1,109,221
Broadcasting 359,955 337,537 343,512
Corporate (3) (65,049) (66,101) (66,919)
------------ ----------- -----------
$ 1,817,256 $ 1,563,101 $ 1,385,814
============ =========== ===========
Depreciation and
amortization
Newspaper publishing $ 302,544 $ 207,720 $ 184,718
Broadcasting 65,210 62,861 60,023
Corporate (3) 8,161 9,510 8,722
------------ ----------- -----------
$ 375,915 $ 280,091 $ 253,463
============ =========== ===========
Operating cash flow (4)
Newspaper publishing $ 1,824,894 $ 1,499,385 $ 1,293,939
Broadcasting 425,165 400,398 403,535
Corporate (3) (56,888) (56,591) (58,197)
------------ ----------- -----------
$ 2,193,171 $ 1,843,192 $ 1,639,277
============ =========== ===========
Identifiable assets (1)
Newspaper publishing $ 10,434,274 $ 5,599,506 $ 3,682,839
Broadcasting 1,978,438 1,915,976 1,872,351
Corporate (3) 567,699 378,437 355,236
------------ ----------- -----------
$ 12,980,411 $ 7,893,919 $ 5,910,426
============ =========== ===========
Capital expenditures (2)
Newspaper publishing $ 199,885 $ 169,259 $ 164,479
Broadcasting 49,829 24,831 25,548
Corporate (3) 100,866 51,055 32,032
------------ ----------- -----------
$ 350,580 $ 245,145 $ 222,059
============ =========== ===========
(1) Excludes assets related to discontinued operations totaling $1,112,527 in
1999 and $1,069,054 in 1998.
(2) Excludes capital expenditures made for discontinued operations totaling
$13,298 for 1999 and $22,366 for 1998.
(3) Corporate amounts represent those not directly related to the company's two
business segments.
(4) Operating cash flow amounts represent operating income plus depreciation and
amortization of intangible assets.
- 50 -
Report of Independent Accountants
To the Board of Directors and Shareholders of Gannett Co., Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, of cash flows and of changes in
shareholders' equity present fairly, in all material respects, the financial
position of Gannett Co., Inc. and its subsidiaries at Dec. 31, 2000 and Dec. 26,
1999, and the results of their operations and their cash flows for each of the
three years in the period ended Dec. 31, 2000 in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
- -----------------------------
Washington, D.C.
February 8, 2001
- 51 -
11-year summary
In thousands of dollars, except per share amounts
2000 1999 1998 1997 1996
------------ ----------- ----------- ------------ -----------
Net operating revenues
Newspaper advertising $ 3,972,936 $ 3,115,250 $ 2,773,247 $ 2,479,828 $ 2,281,071
Newspaper circulation 1,120,991 971,114 958,456 903,309 872,969
Broadcasting 788,767 728,642 721,298 703,558 686,936
All other 339,624 280,356 256,030 221,470 177,237
------------ ----------- ----------- ------------ -----------
Total (Notes a and b, see page 54) 6,222,318 5,095,362 4,709,031 4,308,165 4,018,213
------------ ----------- ----------- ------------ -----------
Operating expenses
Costs and expenses 4,029,147 3,252,170 3,069,754 2,812,218 2,776,171
Depreciation 195,428 169,460 163,776 152,964 147,721
Amortization of intangible assets 180,487 110,631 89,687 80,741 75,043
------------ ----------- ----------- ------------ -----------
Total 4,405,062 3,532,261 3,323,217 3,045,923 2,998,935
------------ ----------- ----------- ------------ -----------
Operating income 1,817,256 1,563,101 1,385,814 1,262,242 1,019,278
Non-operating (expense) income
Interest expense (219,228) (94,619) (79,412) (98,242) (135,563)
Other 10,812 58,705 (11) 305,323 (9) (9,047) 155,825 (7)
------------ ----------- ----------- ------------ -----------
Income before income taxes 1,608,840 1,527,187 1,611,725 1,154,953 1,039,540
Provision for income taxes 636,900 607,800 645,300 473,600 442,900
------------ ----------- ----------- ------------ -----------
Income from continuing operations 971,940 919,387 (11) 966,425 (9) 681,353 596,640 (7)
------------ ----------- ----------- ------------ -----------
Discontinued operations:
Income from the operation of
discontinued businesses
(net of income taxes) (12) 2,437 38,541 33,488 31,326 51,867
Gain on sale of discontinued
businesses (net of income taxes) (13) 744,700 294,580
------------ ----------- ----------- ------------ -----------
Total 747,137 38,541 33,488 31,326 346,447
------------ ----------- ----------- ------------ -----------
Income before cumulative effect of
accounting principle changes 1,719,077 957,928 999,913 712,679 943,087
Cumulative effect on prior years of
accounting principle changes for:
Income taxes
Retiree health and life insurance
benefits
------------ ----------- ----------- ------------ -----------
Net income $ 1,719,077 $ 957,928 $ 999,913 $ 712,679 $ 943,087
============ =========== =========== ============ ===========
Operating cash flow (5) $ 2,193,171 $ 1,843,192 $ 1,639,277 $ 1,495,947 $ 1,242,042
------------ ----------- ----------- ------------ -----------
Per share amounts (1)
Income from continuing operations
before cumulative effect of accounting
principle changes: basic / diluted $3.65/$3.63 $3.29/$3.26 (11) $3.41/$3.38 (9) $2.41/$2.39 $2.12/$2.11(7)
Net income: basic / diluted $6.45/$6.41 $3.43/$3.40 $3.53/$3.50 $2.52/$2.50 $3.35/$3.33
Dividends declared (2) .86 .82 .78 .74 .71
Weighted average number of common shares
outstanding in thousands (2):
basic 266,426 279,048 283,097 283,360 281,782
diluted 268,118 281,608 285,711 285,610 283,426
Financial position
Working capital $ 128,335 $ 191,444 $ 178,418 $ 146,057 $ 47,609
Long-term debt excluding current
maturities 5,747,856 2,463,250 1,306,859 1,740,534 1,880,293
Shareholders' equity 5,103,410 4,629,646 3,979,824 3,479,736 2,930,818
Total assets 12,980,411 9,006,446 6,979,480 6,890,351 6,349,597
Selected financial percentages and ratios
Percentage increase (decrease)
Earnings from continuing operations,
after tax (4) 9.6% 13.3%(10) 14.9%(8) 35.4% 10.2%(6)
Earnings from continuing operations,
after tax, per share:basic/diluted (4) 14.8%/15.2% 14.9%/14.9%(10) 14.5%/14.6%(8) 36.9%/34.3% 8.0%/9.9%(6)
Dividends declared per share 4.9% 5.1% 5.4% 4.2% 2.9%
Return on equity (3) 20.0% 20.6% 21.0% 21.3% 19.8%
Credit ratios
Long-term debt to shareholders' equity 112.6% 53.2% 32.8% 50.0% 64.2%
Times interest expense earned 8.3X 17.1X 21.3X 12.8X 8.7X
- 52 -
1995 1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- ----------- -----------
Net operating revenues
Newspaper advertising $ 2,078,190 $ 1,982,260 $ 1,846,791 $ 1,773,460 $ 1,747,118 $ 1,810,825
Newspaper circulation 816,474 789,375 781,205 762,729 733,943 691,332
Broadcasting 466,187 406,608 397,204 370,613 357,383 396,693
All other 144,636 218,000 202,040 184,035 149,489 137,562
----------- ----------- ----------- ----------- ----------- -----------
Total (Notes a and b, see page 54) 3,505,487 3,396,243 3,227,240 3,090,837 2,987,933 3,036,412
----------- ----------- ----------- ----------- ----------- -----------
Operating expenses
Costs and expenses 2,499,696 2,410,404 2,336,668 2,303,468 2,265,948 2,219,438
Depreciation 141,151 146,054 147,248 139,080 139,268 135,294
Amortization of intangible assets 47,509 44,110 43,771 39,197 39,621 39,649
----------- ----------- ----------- ----------- ----------- -----------
Total 2,688,356 2,600,568 2,527,687 2,481,745 2,444,837 2,394,381
----------- ----------- ----------- ----------- ----------- -----------
Operating income 817,131 795,675 699,553 609,092 543,096 642,031
Non-operating (expense) income
Interest expense (52,175) (45,624) (51,250) (50,817) (71,057) (71,567)
Other 3,754 14,945 5,350 7,814 14,859 10,689
----------- ----------- ----------- ----------- ----------- -----------
Income before income taxes 768,710 764,996 653,653 566,089 486,898 581,153
Provision for income taxes 312,084 309,600 264,400 224,900 194,400 226,600
----------- ----------- ----------- ----------- ----------- -----------
Income from continuing operations 456,626 455,396 389,253 341,189 292,498 354,553
----------- ----------- ----------- ----------- ----------- -----------
Discontinued operations:
Income from the operation of
discontinued businesses
(net of income taxes) (12) 20,636 10,003 8,499 4,491 9,151 22,410
Gain on sale of discontinued
businesses (net of income taxes) (13)
----------- ----------- ----------- ----------- ----------- -----------
Total 20,636 10,003 8,499 4,491 9,151 22,410
----------- ----------- ----------- ----------- ----------- -----------
Income before cumulative effect of
accounting principle changes 477,262 465,399 397,752 345,680 301,649 376,963
Cumulative effect on prior years of
accounting principle changes for:
Income taxes 34,000
Retiree health and life insurance
benefits (180,000)
----------- ----------- ----------- ----------- ----------- -----------
Net income $ 477,262 $ 465,399 $ 397,752 $ 199,680 $ 301,649 $ 376,963
=========== =========== =========== =========== =========== ===========
Operating cash flow (5) $ 1,005,791 $ 985,839 $ 890,572 $ 787,369 $ 721,985 $ 816,974
----------- ----------- ----------- ----------- ----------- -----------
Per share amounts (1)
Income from continuing operations
before cumulative effect of accounting
principle changes: basic / diluted $1.63/$1.62 $1.58/$1.57 $1.33/$1.32 $1.18/$1.18 $.97/$.96 $1.11/$1.10
Net income: basic / diluted $1.70/$1.69 $1.61/$1.60 $1.36/$1.35 $.69/$.69 $1.00/$.99 $1.18/$1.17
Dividends declared (2) .69 .67 .65 .63 .62 .61
Weighted average number of common shares
outstanding in thousands (2):
basic 280,312 288,552 292,948 288,296 301,566 320,094
diluted 282,323 290,148 294,659 290,174 303,267 322,830
Financial position
Working capital $ 41,312 $ 123,783 $ 302,818 $ 199,896 $ 192,266 $ 168,487
Long-term debt excluding current
maturities 2,767,880 767,270 850,686 1,080,756 1,335,394 848,633
Shareholders' equity 2,145,648 1,822,238 1,907,920 1,580,101 1,539,487 2,063,077
Total assets 6,503,800 3,707,052 3,823,798 3,609,009 3,684,080 3,826,145
Selected financial percentages and ratios
Percentage increase (decrease)
Earnings from continuing operations,
after tax (4) 0.3% 17.0% 14.1% 16.6% (17.5%) (5.3%)
Earnings from continuing operations,
after tax, per share:basic/diluted (4) 3.2%/3.2% 18.8%/18.9% 12.3%/11.9% 22.0%/22.9% (12.4%)/(12.7%) (4.6%)/(5.2%)
Dividends declared per share 3.0% 3.1% 3.2% 1.6% 2.5% 9.0%
Return on equity (3) 23.0% 24.4% 22.3% 21.9% 16.2% 17.5%
Credit ratios
Long-term debt to shareholders' equity 129.0% 42.1% 44.6% 68.4% 86.7% 41.1%
Times interest expense earned 15.7X 17.8X 13.8X 12.1X 7.9X 9.1X
(1) Per share amounts have been based upon average number of shares
outstanding during each year, giving retroactive effect to adjustment
in (2).
(2) Shares outstanding and dividends declared have been converted to a
comparable basis by reflecting retroactively the 2-for-1 stock split
effective Oct. 6, 1997.
(3) Based upon average shareholders' equity (and income from continuing
operations before non-recurring gains and accounting principle changes).
(4) Before cumulative effect of accounting principle changes.
(5) Operating cash flow represents operating income plus depreciation and
amortization of intangible assets.
(6) Excludes 1996 after-tax gain on exchange of broadcast stations of $93
million or $.33 per share.
(7) Includes pre-tax gain on exchange of broadcast stations of $158 million
(after-tax gain of $93 million or $.33 per share).
(8) Excludes 1998 $184 million after-tax net non-operating gain principally
from the disposition of the radio and alarm security businesses
($.65 per share-basic and $.64 per share-diluted).
(9) Includes pre-tax net non-operating gain principally from the disposition
of the radio and alarm security businesses of $307 million (after-tax
gain of $184 million or $.65 per share-basic and $.64 per
share-diluted).
(10) Excludes 1999 $33 million after-tax net non-operating gain principally
from the exchange of KVUE-TV for KXTV-TV ($.11 per share).
(11) Includes pre-tax net non-operating gain principally from the exchange of
KVUE-TV for KXTV-TV of $55 million (after-tax gain of $33 million or
$.11 per share).
(12) Includes results from businesses sold and accounted for as discontinued
operations (cable - 1995 to 2000; security - 1995 to 1998;
entertainment - 1995 to 1996; outdoor - 1990 to 1996).
(13) Includes gain from businesses sold and accounted for as discontinued
operations (cable - 2000; outdoor - 1996).
Note: The amounts above reflect the classification change made to report the
operating results from the company's 50% owned joint operating agencies on the
equity method of accounting (as a net amount in other operating revenue).
- 53 -
Notes to 11-year summary
(a) The company and its subsidiaries made the acquisitions listed below
during the period. The results of operations of these acquired businesses are
included in the accompanying financial information from the date of acquisition.
Note 2 of the consolidated financial statements on page 40 contains further
information concerning certain of these acquisitions.
(b) During the period, the company sold or otherwise disposed of
substantially all of the assets or capital stock of certain other subsidiaries
and divisions of other subsidiaries. Note 2 of the consolidated financial
statements on page 40 contains further information concerning certain of these
dispositions.
Acquisitions 1990-2000
1990
March 28 Great Falls (Mont.) Tribune
May 17 Ye Olde Fishwrapper
June 18 The Shopper Advertising, Inc.
Sept. 7 Desert Community Newspapers
Dec. 27 North Santiam Newspapers
Dec. 28 Pensacola Engraving Co.
1991
Feb. 11 The Add Sheet
April 3 New Jersey Publishing Co.
Aug. 30 The Times Journal Co.,
including The Journal Newspapers,
The Journal Printing Co. (now Springfield Offset)
and Telematch
Oct. 3 Gulf Breeze Publishing Co.
1992
April 24 Graphic Publications, Inc.
1993
Jan. 30 The Honolulu Advertiser
April 24 Tulare Advance-Register
1994
May 2 Nursing Spectrum
June 9 Altoona Herald-Mitchellville Index and the Eastern ADvantage
Dec. 1 KTHV-TV, Little Rock
1995
Dec. 4 Multimedia, Inc.
1996
Dec. 9 WTSP-TV, Tampa-St. Petersburg, Fla.
1997
Jan. 31 WZZM-TV, Grand Rapids, Mich.
Jan. 31 WGRZ-TV, Buffalo, N.Y.
May 5 Printed Media Companies
May 27 KNAZ-TV, Flagstaff, Ariz.
May 27 KMOH-TV, Kingman, Ariz.
July 18 Mary Morgan, Inc.
Aug. 1 Army Times Publishing Co., Inc.
Oct. 24 New Jersey Press, Inc.
1998
Jan. 5 WCSH-TV, Portland, Maine
Jan. 5 WLBZ-TV, Bangor, Maine
April 30 WLTX-TV, Columbia, S.C.
May 31 Classified Gazette, San Rafael, Calif.
July 7 Ocean County Observer, Toms River, N.J.
July 7 Daily Record, Morristown, N.J.
July 7 Manahawkin Newspapers, Manahawkin, N.J.
Aug. 31 TCI Cable Kansas
Aug. 31 New Castle County Shopper's Guide, Brandywine Valley
Weekly and Autos plus, Wilmington, Del.
1999
March 17 The Reporter, Melbourne, Fla.
March 29 Lehigh Acres News-Star, Lehigh Acres, Fla.
June 1 Dealer Magazine, Reno, Nev.
June 1 KXTV-TV, Sacramento, Calif.
July 26 Newsquest plc, United Kingdom
Sept. 28 Tucker Communications, Inc., Westchester Co., N.Y.
Sept. 29 Pennypower Shopping News, Branson & Springfield, Mo.
2000
Jan. 3 The Pioneer Republican and other publications, Iowa
Jan. 4 Buyers' Digest, Franklin County, Vt.
Feb. 1 The Clarion, Redcar, United Kingdom
Mar. 17 WJXX-TV, Jacksonville, Fla.
Mar. 31 Mason Valley News and Fernley Leader-Dayton Courier,
Lyon Co., Nev.
Apr. 7 Brevard Technical Journal, Brevard County, Fla.
May 10 Dickson Shoppers, Middle Tennessee
June 2 Greenville Parent Magazine, Greenville County, S.C.
June 5 News Communications & Media plc, United Kingdom
June 30 Space Coast Press, Brevard County, Fla.
July 21 Certain assets of Thomson Newspapers Inc., including
8 dailies in Wisconsin; 8 dailies in central Ohio; daily
newspapers in Lafayette, La.; Salisbury, Md.; and
St. George, Utah; and numerous weeklies and niche
publications.
Aug. 1 Central Newspapers, Inc., including The Arizona Republic,
The Indianapolis Star, and other daily newspapers in
Indiana and Louisiana; and related media and information
businesses.
Sept. 7 Daily World, Opelousas, La.
Oct. 30 Windsor Beacon, Windsor, Colo.
Dec. 1 50+ Lifestyles and other monthly magazines,
Des Moines, Iowa
- 54 -
Form 10-K information
Business of the company
Gannett Co., Inc. is a diversified information company that operates
primarily in the U.S. and the United Kingdom. Approximately 89% of its revenues
are from domestic operations. In addition to operations in the United Kingdom,
it has limited foreign operations in certain European and Asian markets. Its
corporate headquarters is in Arlington, Va., near Washington, D.C. It was
incorporated in New York in 1923 and was reincorporated in Delaware in 1972.
The company presently reports two principal business segments: newspaper
publishing and television broadcasting.
The company's newspapers make up the largest newspaper group in the U.S. in
circulation. In 2000, the company acquired Newscom plc, one of the largest
regional publishers in the United Kingdom; 19 daily newspapers and numerous
weekly and niche publications from Thomson Newspapers Inc.; and Central
Newspapers, Inc., with six daily newspapers and other related media and
information businesses. At the end of 2000, the company operated 114 daily
newspapers, with a total average daily circulation of approximately 8.4 million,
including USA TODAY. The company also publishes USA WEEKEND, a weekend newspaper
magazine, and in excess of 300 non-daily publications in the United States and
nearly 300 non-daily publications in the United Kingdom.
The newspaper segment includes the following: Gannett News Service, which
provides news services for its newspaper operations; Gannett Retail Advertising
Group, which represents the company's local newspapers in the sale of
advertising to national and regional retailers and service providers; and
Gannett Offset, which is composed of the Gannett Offset print group and Gannett
Marketing Services Group. The Gannett Offset print group includes seven
non-heatset printing plants and two heatset printing facilities. Gannett
Offset's dedicated commercial printing plants are located in Atlanta, Ga.;
Chandler, Ariz.; Minneapolis, Minn.; Miramar, Fla.; Nashville, Tenn.; Norwood,
Mass.; Pensacola, Fla.; St. Louis, Mo.; and Springfield, Va. Gannett Marketing
Services Group coordinates the sale of direct-marketing services through:
Telematch, a database management and data enhancement company; Gannett Direct
Marketing Services, a direct-marketing company with operations in Louisville,
Ky.; and Gannett TeleMarketing, a telephone sales and marketing company. The
company also owns USATODAY.com and other Internet services at most of its local
newspapers and television stations; Gannett Media Technologies International,
which develops and markets software and other products for the publishing
industry; Nursing Spectrum, publisher of biweekly periodicals specializing in
advertising for nursing employment; Army Times Publishing Company, which
publishes military and defense newspapers; and a 19.49% interest in California
Newspapers Partnership, a partnership that includes 21 daily California
newspapers.
On Dec. 31, 2000, the broadcasting division included 22 television stations
in markets with more than 17.9 million households.
The company's cable business was sold on Jan. 31, 2000, and its results for
2000 and prior years are treated as discontinued operations in the company's
statements of income and related discussions elsewhere in this report.
Newspaper publishing/United States
On Dec. 31, 2000, the company operated 99 daily newspapers, including USA
TODAY, and more than 300 non-daily local publications, in 40 states and Guam.
The Newspaper Division is headquartered in Arlington, Va., and on Dec. 31, 2000,
it had approximately 41,000 full-time and part-time employees.
USA TODAY was introduced in 1982 as the country's first national,
general-interest daily newspaper. It is available in all 50 states and is
available to readers on the day of publication in the top 100 metropolitan
markets in the U.S.
USA TODAY is produced at facilities in Arlington, Va., and is transmitted
via satellite to offset printing plants around the country. It is printed at
Gannett plants in 21 U.S. markets and under contract at offset plants in 15
other U.S. markets. It is sold at newsstands and vending machines generally at
50 cents a copy. Mail subscriptions are available nationwide and abroad, and
home and office delivery is offered in many markets. Approximately 67% of its
net paid circulation results from single-copy sales at newsstands or vending
machines and the remainder is from home and office delivery, mail and other
sales.
For 2000, USA TODAY's advertising revenues and volume rose 12% and 8%,
respectively.
USA TODAY International is printed from satellite transmission under
contract in London, Frankfurt, Hong Kong, Milan and Belgium, and is distributed
in Europe, the Middle East, Africa and Asia. It is available in more than 60
foreign countries.
USATODAY.com reached more than 25 million visitors per month by the end of
2000 and its revenue increased 18%.
Gannett News Service (GNS) is headquartered in Arlington, Va., and has
bureaus in eight other states (see page 72 for more information). GNS provides
national and regional news coverage and sports, features, photo and graphic
services to Gannett newspapers. GNS also is distributed by syndication to
several non-Gannett newspapers, including ones in Chicago, Salt Lake City,
Boston and Seattle.
The newspaper publishing segment also includes USA WEEKEND, which is
distributed as a weekend newspaper magazine in 555 newspapers throughout the
country, with a total circulation of 22.7 million as of January 2001.
Also included is Nursing Spectrum, publisher of biweekly periodicals
advertising nursing employment. Nursing Spectrum's circulation reaches over a
million registered nurses each month, or almost half of the registered nurses in
the United States. By the end of 2000, Nursing Spectrum's award-winning Web site
had about 500,000 unique visitors each month.
At the end of 2000, 70 of the company's daily newspapers, including USA
TODAY, were published in the morning and 29 were published in the evening.
Individually, Gannett newspapers are the leading news and information
source with strong brand recognition in their markets. Their durability lies in
the quality of their management, their flexibility, their focus on such
customer-directed programs as Complete Community Coverage in News,
cross-branding of the daily newspaper, online, and weekly products, ADQ, and
their capacity to invest in new technology. Collectively, they form a powerful
network to distribute news and advertising information across the nation.
- 55 -
News departments across Gannett continued to emphasize coverage of local
news as the key to successful news reporting. Under the Complete Community
Coverage model developed in 2000, the vast majority of newsrooms expanded the
amount of local news on their Web sites. The objective is to be the primary
source of local news and information, reaching more people interested in local
news in more ways.
To advance that objective in 2000, online training sessions were held for
top editors and many online newsroom editors. An internal corporate News Web
site was established to provide further guidance for newsrooms on a variety of
topics, ranging from readership information to online delivery of news.
To help expand the readership base, especially among younger readers, a new
weekly section on technology was developed. Called "e, your guide to personal
technology," the section is produced at Gannett News Service and distributed
electronically or on CD-ROM to all Gannett newspapers. The newspapers use part
or all of the section for their readers. Local advertising staffs provide
advertising content for the section. Additionally, an online version is produced
by the corporate Digital Production Center and made available for each newspaper
Web site. Gannett Broadcast Web sites have begun using the online version as
well.
All of the company's daily newspapers receive Gannett News Service. In
addition, all subscribe to The Associated Press, and some receive various
supplemental news and syndicated features services.
In 2000, Gannett News Service staffers joined with USA TODAY reporters and
editors to provide Gannett newspapers with coverage of the two national
political conventions, the Summer Olympics in Australia, and the presidential
debates and election.
In 2000, the company continued to implement plans to increase its revenues
from medium and smaller advertisers in each market it serves. Revenues from
these types of advertisers increased again in 2000. Initiatives focused on sales
and rate management and the construction of pre-packaged programs scalable to
the company's largest and smallest markets. Sales management initiatives
included allocating proper resources to increase the number and quality of sales
calls, improving sales compensation and providing consistent sales training.
Rate management programs focused on selling multiple advertising insertions and
reviewing rates and rate structures to assure they match the opportunities in
the market. The company operates an extranet site to provide its advertising
management with up-to-date information and sales programs 24 hours a day, seven
days a week. The company regularly calculates market potential and adjusts its
strategic plans accordingly. Significant efforts will continue to be taken in
2001 to make the company's personnel increasingly competitive in their
leadership, strategic thinking and marketing skills.
The newspaper division's continuous improvement quality initiative, known
as ADQ, produced its sixth straight year of sharply improving ad and bill
quality. ADQ, which has reduced credit costs significantly since its 1995
start-up, is being introduced to the newspapers acquired in 2000.
The online strategy at Gannett local newspapers has been consistent from
the start of our online efforts. This has been built around several major
principles. First, the expenditures for the business must be justified by
additional revenues, additional customers and additional profits. Second, the
company concentrates on serving our local markets. The reason a consumer will
turn to the local newspaper's online site is local news and information. This
differentiates the paper, which is the known and trusted source for such
information today, from other Internet sites. This will be a major factor
allowing newspapers to compete successfully as Internet information providers.
Lastly, the company takes advantage of the natural synergies between the local
newspaper and local Web site. The local content already available, the customer
relationships, the news and advertising sales forces, and the promotional
vehicle, are all advantages for the newspaper. The company's strategy is to use
these advantages to create the best content, create packaged advertising
products that serve the advertisers, hold costs down, and leverage the known and
trusted brand of the newspaper.
This strategy has served Gannett well in the development of our newspaper
Internet efforts. The aggressive local focus, including advertising sales
efforts, combined with effective use of national economies of scale and
standardized technology resulted in solid results in 2000.
Pro forma advertising revenue for local newspaper Web sites increased by
88% in 2000, which followed a 68% increase in 1999. Recent traffic on our sites
was more than 40 million visitors and over 150 million pages viewed per month.
Twenty-five of local Gannett newspapers' Web sites made a profit in 2000.
The company achieved these results in a year that Web sites for virtually
all smaller market Gannett newspapers were launched. New launches were
accomplished through centralized production to provide consistent high quality
Web sites while limiting costs. Except for a few small markets, all Gannett
newspapers now have operational Web sites.
The company is also pursuing opportunities to develop national Internet
businesses. Through minority partnerships and investments, the strength of a
large and broad base of the company's and other newspaper franchises is
leveraged with sophisticated, flexible Internet capabilities. The business plans
of these ventures are developing to deliver information, services and
advertising both nationally and locally. These ventures are also the source of
additional content, advertising opportunities and technical resources that
augment our local newspaper efforts to build and improve their Internet
businesses.
- 56 -
Two such businesses which are important to the company's Internet plans
include Classified Ventures and InfiNet. Classified Ventures, owned by a
consortium of media companies, operates Internet businesses on the national
level in the real estate and automotive categories by networking local newspaper
sites and offerings. Along with the new national opportunities for Classified
Ventures, the company's local newspaper sites are also enhanced by new
customers, content and technology from their association with Classified
Ventures and its other participating newspapers.
InfiNet, a partnership with other major media companies which provides
Internet site hosting expertise, enables the company's papers to have better,
more cost-efficient and reliable basic hosting technology than could be provided
on a site-by-site basis.
The senior executive of each newspaper is the publisher, and the newspapers
have advertising, business, information systems, circulation, news, market
development, human resources, online and production departments.
Newsroom editorial system replacements were installed in Brevard, Fort
Myers, Bridgewater, Tucson, Nashville and Asheville in 2000. In 2001, new
editorial systems will be installed in Lansing, Rochester, the Wisconsin
Winnebego group of six newspapers, Battle Creek, St. George and Salisbury. The
newer systems have Web-conversion capabilities that make it easier and quicker
for newspapers to post stories to their Web sites.
Gannett newsrooms continue to make the conversion to digital photography,
which enables our newspapers to provide photos with very late-breaking stories
and to be more competitive on their Web sites. By the end of 2001, 45 Gannett
news photo departments are expected to be 100 percent digital.
The Mobile Advertising Sales System, or MASS, is Gannett's sales force
automation software. Designed to run on laptops and be used on sales calls, the
technology provides account executives with up-to-date customer and order
information; an electronic Rate Calculator for pricing retail ads; productivity
tools for managing their accounts and schedules; and software for sales
presentations. Twenty-five percent of Gannett's newspapers have eliminated
handwritten ad insertion orders and are utilizing the MASS software to
electronically enter and process them on the laptops.
A new laptop-based sales program was tested at three newspapers in 2000.
Called the Rate Matrix, it is a program for selling multiple ads across multiple
product lines and packaging them into one buy for the customer. This program
embodies significant change from how newspapers traditionally sell advertising,
which is by individual product. A typical Rate Matrix package might include a
retail display ad that runs four times, a classified help wanted ad, a print and
deliver insert targeted to specific zones, and an online banner ad. The test
newspapers used a new laptop-based sales tool, called the Rate Matrix
Calculator, to calculate package prices while on sales calls. Based on the
program's success at test newspapers, it will be rolled out to more newspapers
in 2001.
Gannett Creative Link was launched in early 2000 as a means for Gannett
newspapers to share published and speculative ads. It is a Web based system that
enables account executives and artists to view and use advertising concepts
created by other Gannett newspapers.
Gannett Media Technologies International (GMTI) transitioned from
delivering its Celebro for Real Estate on desktop computers to providing real
estate and other application services via the Internet. Celebro.com automates
the scheduling and production of real estate ads, freeing newspapers from
production requirements. Real Estate companies are now linked directly to GMTI's
database servers running automation software that builds the ads and sends
complete, digitized ad files to our newspapers for pagination and printing. GMTI
converted a number of Gannett newspapers to Celebro.com in 2000 including
Cincinnati, Detroit, Nashville, Tucson, Louisville and Ft. Collins. Thirteen
non-Gannett newspapers and six Real Estate companies are also using
Celebro.com's ASP solution. Notable non-Gannett properties purchasing
Celebro.com in 2000 include the San Francisco Newspaper Agency, Coldwell Banker
Moore in Denver and The News-Tribune in Tacoma, Washington.
In mid-2000, GMTI launched its Celebro.com CarsPlus service producing auto
ads at the Rockford Register Star. GMTI also signed an agreement with Classified
Ventures linking its Celebro CarsPlus print advertising automation software to
cars.com Web-based used car database to facilitate one-stop multimedia
advertising packages.
Celebro CityServer, GMTI's software for building online shopping and
commerce guides on Web sites, moved from pilot test to first-stage rollout to 25
Gannett properties this year.
The Digital Collections integrated asset management system has now been
installed at 66 Gannett newspapers and 16 non-Gannett newspapers. DC Version
4.0, a revision based on non-proprietary Web browsers coupled with an Oracle
database, was introduced in 2000. This version increases the number of data
types that can be stored, bringing to users the capability to archive and
re-purpose digital assets that include audio and video files.
In addition, DC Version 4.0 has an interface to MagnaCash incorporated in
the product. This will enable publishers to market their archives and allow
consumers to charge the purchased articles to credit card accounts.
- 57 -
With respect to newspaper production, 67 daily newspaper plants print by
the offset process, and 14 plants print using various letterpress processes. To
date, there are 70 newspapers (including certain of the new acquisitions) that
have converted to the new 50 inch web width format. Readers have found this new
format size to be easier to handle and use. The 50 inch format change equates to
more than a seven percent savings in newsprint consumption. More of the
company's newspapers are scheduled for web width reduction in 2001.
In recent years, improved technology for all of the newspapers has resulted
in greater speed and accuracy and in a reduction in the number of production
hours worked. The company expects this trend to continue in 2001.
The principal sources of newspaper revenues are circulation and
advertising.
Circulation: Thirty of the company's local newspapers reported gains in
daily circulation in 2000, and 13 increased Sunday circulation. Home-delivery
prices for the company's newspapers are established individually for each
newspaper and range from $1.50 to $2.86 per week for daily newspapers and from
$.71 to $2.33 per copy for Sunday newspapers. Price increases for certain
elements of local circulation volume were initiated at 34 newspapers in 2000 and
similar targeted increases are planned at 27 newspapers in 2001.
Additional information about the circulation of the company's newspapers
may be found on pages 26-27, 60 and 70-72 of this annual report.
Advertising: The newspapers have advertising departments that sell retail,
classified and national advertising. The Gannett Retail Advertising Group also
sells advertising on behalf of the company's local newspapers to national and
regional retailers and service providers. The company also contracts with
outside representative firms that specialize in the sale of national
advertising. Analyses of newspaper advertising revenues are presented on pages
26 and 60 of this report.
Retail advertising is display advertising associated with local merchants,
such as department and grocery stores. Classified advertising includes ads
listed together in sequence by the nature of the ads, such as automobile sales,
real estate sales and "help wanted." National advertising is display advertising
principally from advertisers who are promoting products or brand names
nationally. Retail and national advertising may appear in the newspaper itself
or in preprinted sections. Generally there are different rates for each category
of advertising, and the rates for each newspaper are set independently, varying
from city to city.
The newspapers have made continuing efforts to serve their readers and
advertisers by introducing complete market coverage programs and by targeting
specific market segments desired by many advertisers through the use of
specially zoned editions and other special publications.
Continuing and comprehensive efforts are also underway to combine Web site
and newspaper marketing and advertising sales opportunities.
Competition: The company's newspapers compete with other media for
advertising principally on the basis of their advertising rates and their
performance in helping to sell the advertisers' products or services. They
compete for circulation principally on the basis of their content and price.
While most of the company's newspapers do not have daily newspaper competitors
that are published in the same city, in certain of the company's larger markets,
there is such direct competition. Most of the company's newspapers compete with
other newspapers published in nearby cities and towns and with free distribution
and paid advertising weeklies, as well as other print and non-print media.
The rate of development of opportunities in, and competition from, emerging
electronic communications services, including those related to the Internet, is
increasing. Through internal development programs, acquisitions and
partnerships, the company's efforts to explore new opportunities in news,
information and communications businesses have expanded and will continue to do
so.
At the end of 2000, The Cincinnati Enquirer, The Detroit News, The Honolulu
Advertiser and the Tucson (Ariz.) Citizen were published under joint operating
agreements with non-Gannett newspapers located in the same cities. All of these
agreements provide for joint business, advertising, production and circulation
operations and a contractual division of profits. The editorial and reporting
staffs of the company's newspapers, however, are separate and autonomous from
those of the non-Gannett newspapers. Refer to Note 1 in the notes to
consolidated financial statements for a discussion of an accounting method
change with respect to two of the company's newspaper subsidiaries that are
participants in joint operating agencies.
Properties: Generally, the company owns the plants that house all aspects
of the newspaper publication process. In the case of USA TODAY, at Dec. 31,
2000, 15 non-Gannett printers were used to print the newspaper in U.S. markets
where there are no company newspapers with appropriate facilities. Five
non-Gannett printers in foreign countries are used to print USA TODAY
International. USA WEEKEND and Nursing Spectrum are also printed under contracts
with commercial printing companies. Many of the company's newspapers have
outside news bureaus and sales offices, which generally are leased. In a few
markets, two or more of the company's newspapers share combined facilities; and
in certain locations, facilities are shared with other newspaper properties. The
company's newspaper properties have rail siding facilities or access to main
roads for newsprint delivery purposes and are conveniently located for
distribution purposes.
- 58 -
During the past five years, new or substantial additions or remodeling of
existing facilities have been completed or are at some stage of construction at
25 of the company's newspaper operations. Gannett continues to make significant
investments in renovations or new facilities, where the investment improves the
products for its readers and advertisers as well as productivity and operating
efficiency. The company's facilities are adequate for present operations.
Regulation: Gannett is committed to protecting the environment. The
company's goal is to ensure its facilities comply with federal, state, local and
foreign environmental laws and to incorporate appropriate environmental
practices and standards in our operations. The company employs a corporate
environmental manager responsible for overseeing not only regulatory compliance
but also preventive measures. The company is one of the industry leaders in the
use of recycled newsprint. The company increased its domestic purchases of
newsprint containing some recycled content from 42,000 metric tons in 1989 to
885,000 metric tons in 2000. The company's newspapers use inks, photographic
chemicals, solvents and fuels. The use and disposal of these substances may be
regulated by federal, state and local agencies. Through its environmental
compliance plan, the company is taking effective measures to comply with
environmental laws. Any release into the environment may create obligations to
private and governmental entities under a variety of statutes and rules
regulating the environment.
Some of the company's newspaper subsidiaries have been included among the
potentially responsible parties in connection with the alleged disposal of ink
or other chemical wastes at disposal sites which have been subsequently
identified as inactive hazardous waste sites by the U.S. Environmental
Protection Agency or comparable state agencies. Generally, the company's
subsidiaries are de minimus parties. At one such site, the amount in controversy
may exceed $100,000. The company believes its liability is substantially less
and is defending the case. The company provides for costs associated with these
matters in accordance with generally accepted accounting principles. The company
does not believe that these matters will have any significant impact on its
financial position or results of operations.
Additional information about the company's newspapers may be found on pages
70-73 of this report.
Newspapers/United Kingdom
In the second quarter of 2000, the company purchased all of the stock of
News Communications & Media plc ("Newscom"), a large, regional newspaper
publisher in the United Kingdom, with 114 publications in total, including 4
evening dailies. In addition, Newscom operates a contract printing and magazine
publishing business. The 2000 Newscom acquisition increased the group's presence
in the prosperous southern area of the United Kingdom. The acquisition was
accounted for under the purchase method of accounting. This acquisition has been
integrated into the company's existing U.K. operation, Newsquest. Altogether,
Newsquest now publishes nearly 300 titles in the United Kingdom, including 15
daily newspapers.
Newsquest manages its newspaper publishing activities around geographic
clusters to maximize the use of management, finance, printing and personnel
resources. This approach enables the group to offer readers and advertisers a
range of attractive products covering the market. The clustering of titles and,
usually, the publication of a free newspaper alongside a paid-for newspaper
allows cross-selling of advertising among newspapers serving the same or
contiguous markets, thus satisfying the needs of its advertisers and audiences.
At the end of 2000, Newsquest had 16 such clusters in the United Kingdom.
Newsquest's policy is to produce free and paid-for newspapers with an attractive
level of quality local editorial content. Newsquest also distributes a
substantial volume of advertising leaflets in the communities it serves and it
offers a travel/vacation booking service.
Newsquest's full year pro forma revenues for 2000 were in excess of $700
million (including Newscom). As with U.S. newspapers, advertising is the largest
component of revenue, comprising approximately 82%. Circulation revenue
represents 11% and printing activities account for much of the remainder.
Printing revenue increased in 2000 mainly as a result of the contract printing
activities acquired with Newscom. Compared to U.S. newspaper operations, ad
revenue at Newsquest is a greater percent of total revenue and circulation
revenue is a lesser percent, reflecting the greater volume and importance of
free non-daily publications among Newsquest's titles.
Newsquest is actively seeking to maximize the value of its local
information expertise through development of opportunities offered by the
Internet. Through internal growth and in partnership with other businesses,
Newsquest has established a number of local and national Web sites which offer
news and other information of special interest to its communities, as well as
classified and retail advertising and shopping services. During 2000, Newsquest
became a minority investor in FS Auctions, the auction subsidiary of one of the
U.K.'s largest Internet service providers, and in Schoolsnet, an education
oriented site. These investee operations complement the local editorial content
and classified advertising offered by Newsquest newspapers.
- 59 -
Newsquest owns certain of the plants where its newspapers are produced and
leases other facilities. Its headquarters is in Morden, Surrey. All of its
properties are adequate for present purposes. A listing of Newsquest publishing
centers and key properties may be found on page 74. A new printing plant is
being developed at Lostock to replace the existing press and add color capacity.
At the end of 2000, Newsquest had approximately 8,400 full-time and
part-time employees. Newsquest employees have local staff councils for
consultation and communication with Newsquest subsidiary management. Newsquest
provides its employees with the option to participate in a retirement plan that
incorporates life insurance and a stock option linked savings plan.
Newsquest newspapers operate in competitive markets. Their principal
competitors include other regional and national newspaper and magazine
publishers, other advertising media such as radio and billboard, and
Internet-based news, information and communication businesses.
Key revenue and expense data - for all newspapers combined
The table that follows summarizes the circulation volume and revenues of
U.S. newspapers owned by the company at the end of 2000, including USA TODAY.
The table also includes circulation revenue for all Newsquest publications and
circulation volume for Newsquest's fifteen paid daily newspapers. This table
assumes that all newspapers owned by the company at the end of 2000 were owned
during all years shown. For 2000, the amounts are based on a 53-week period.
For purposes of presenting pro forma information, the tables and related
commentary below include net paid circulation and its pro rata portion of the
revenue and linage data for the company's newspapers participating in joint
operating agencies, consistent with prior years.
Circulation: newspapers owned on Dec. 31, 2000
Circulation Daily Sunday
revenues net paid net paid
in thousands circulation circulation
------------ ----------- -----------
2000 $1,306,780 8,368,000 7,154,000
1999 $1,290,559 8,399,000 7,260,000
1998 $1,290,236 8,486,000 7,375,000
1997 $1,259,935 8,399,000 7,452,000
1996 $1,198,944 8,369,000 7,536,000
The following chart summarizes the advertising linage (in six-column
inches) and advertising revenues of the newspapers owned by the company at the
end of 2000. For Newsquest, advertising revenues are reflected, but linage is
not. The chart assumes that all of the newspapers owned at the end of 2000 were
owned throughout the years shown. For 2000, the amounts are based on a 53-week
period.
Advertising: newspapers owned on Dec. 31, 2000
Advertising Inches of
revenues (ROP) advertising,
in thousands excluding preprints
------------ -------------------
2000 $3,964,193 104,700,000
1999 $3,800,395 101,253,000
1998 $3,580,739 95,696,000
1997 $3,347,434 90,826,000
1996 $3,045,551 84,940,000
- 60 -
Total newspaper ad revenues on a pro forma basis rose 5% in 2000. Most
major advertising classifications showed solid year-over-year growth during
2000. Ad spending by larger retailers declined for the year, reflecting closings
and consolidations, but this was mostly offset by greater revenue from small and
medium sized advertisers. Classified advertising revenues grew 4% on the
strength of employment, automotive, and real estate categories. National
advertising revenues increased 10%. Preprint revenues grew 10%.
The company's newspaper segment advertising and other revenues from
Internet activities totaled approximately $62 million in 2000 and $39 million in
1999.
For 2001, ad revenue and volume growth is anticipated in all categories.
Generally modest price increases are planned at most properties, and the company
will continue to expand and refine sales and marketing efforts. Changes in
economic factors such as interest rates, employment levels and the rate of
general economic growth will have an impact on revenue at all of the company's
newspapers.
Raw materials: Newsprint is the basic raw material used to publish
newspapers. During 2000, the company's total newsprint consumption was 1,211,000
metric tons, including the company's portion of newsprint consumed at joint
operating agencies, consumption by USA WEEKEND, USA TODAY tonnage consumed at
non-Gannett print sites and consumption by Newsquest. Newsprint consumption was
up 17% in 2000 due principally to consumption by acquired properties in 2000 and
1999. Newsprint consumption savings were realized due to web width reductions at
a number of the company's properties in 1999 and 2000. The company purchases
newsprint from 24 North American, European and other offshore suppliers under
contracts that expire at various times through 2010.
During 2000, all of the company's newspapers consumed some recycled
newsprint. For the year, more than 80% of the company's domestic newsprint
purchases contained recycled content.
In 2000, newsprint supplies were adequate. The company believes that the
available sources of newsprint, together with present inventories, will continue
to be adequate to supply the needs of its newspapers.
The average cost per ton of newsprint consumed in 2000 increased 3%
compared to the 1999 average cost.
Broadcasting
On December 31, 2000, the company's television division, headquartered in
Arlington, Va., included 22 television stations in markets with a total of more
than 17.9 million households. On March 17, 2000, the company completed the
acquisition of WJXX-TV, the ABC affiliate in Jacksonville, Fla. The company
continues to own WTLV-TV, the NBC affiliate in Jacksonville.
At the end of 2000, the broadcasting division had approximately 3,100
full-time and part-time employees. Broadcasting revenues accounted for
approximately 13% of the company's reported operating revenues from continuing
operations in 2000, 14% in 1999 and 15% in 1998.
The principal sources of the company's broadcasting revenues are: 1) local
advertising focusing on the immediate geographic area of the stations; 2)
national advertising; 3) compensation paid by the networks for carrying
commercial network programs; and 4) payments by advertisers to television
stations for other services, such as the production of advertising material. The
advertising revenues derived from a station's local news programs make up a
significant part of its total revenues.
Advertising rates charged by a television station are based primarily upon
the station's ability to attract viewers, demographics and the number of
television households in the area served by the station. Practically all
national advertising is placed through independent advertising representatives.
Local advertising time is sold by each station's own sales force.
Generally, a network provides programs to its affiliated television
stations, sells commercial advertising announcements within the network programs
and compensates the local stations by paying an amount based on the television
station's network affiliation agreement.
For all of its stations, the company is party to network affiliation
agreements. The company's three ABC affiliates have agreements which expire
between 2005-2007. The agreements for all of its six CBS affiliates run through
2004-2005. The company's 13 NBC affiliated stations have agreements that will
expire in December 2005. The company will continue to receive compensation under
these new agreements at the 2000 compensation level with the exception of one
smaller market station.
Programming: The costs of locally produced and purchased syndicated
programming are a significant portion of television operating expenses.
Syndicated programming costs are determined based upon largely uncontrollable
market factors, including demand from the independent and affiliated stations
within the market and in some cases from cable operations. In recent years, the
company's television stations have emphasized their locally produced news and
entertainment programming in an effort to provide programs that distinguish the
stations from the competition and to better control costs.
- 61 -
Properties: The company's broadcasting facilities are adequately equipped
with the necessary television broadcasting equipment. The company owns
transmitter sites in 23 locations and leases sites in 8 others.
During the past five years, new broadcasting facilities or substantial
improvements to existing facilities were completed in Phoenix, Jacksonville,
Knoxville, Columbia and Atlanta. A new facility was completed in December 2000
in Cleveland. Facility expansion to accommodate Digital Television (DTV) was
completed at five sites in 1998/1999 and three sites in 2000. Additional station
facilities may be converted to DTV in future years. The company's broadcast
facilities are adequate for present purposes.
Competition: In each of its broadcasting markets, the company's stations
compete for revenues with other network-affiliated and independent television
and radio broadcasters and with other advertising media, such as cable
television, newspapers, magazines and outdoor advertising. The stations also
compete in the emerging local electronic media space, which includes Internet or
Internet-enabled devices and any digital spectrum opportunities associated with
DTV. The company's broadcasting stations compete principally on the basis of
their market share, advertising rates and audience composition.
Local news is most important to a station's success, and there is a growing
emphasis on other forms of programming that relate to the local community.
Network and syndicated programming constitute the majority of all other
programming broadcast on the company's television stations, and the company's
competitive position is directly affected by viewer acceptance of this
programming. Other sources of present and potential competition for the
company's broadcasting properties include pay cable, home video and audio
recorders and video disc players, direct broadcast satellite and low power
television. Some of these competing services have the potential of providing
improved signal reception or increased home entertainment selection, and they
are continuing development and expansion.
Pursuant to the Satellite Home Viewer Improvement Act of 1999, several of
the company's television stations are currently being delivered by satellite
carriers to subscribers within the stations' market. The company has entered
into retransmission consent agreements with satellite carriers that authorize
such delivery that expire in mid-2004. This law also permits satellite carriers
to retransmit distant network television stations into areas served by local
television stations if it is determined, using FCC-approved signal strength
measurement standards, that local stations do not deliver an acceptable viewing
signal.
Regulation: The company's television stations are operated under the
authority of the Federal Communications Commission (FCC) under the
Communications Act of 1934, as amended (Communications Act), and the rules and
policies of the FCC (FCC Regulations).
Television broadcast licenses are granted for periods of eight years. They
are renewable by broadcasters upon application to the FCC and usually are
renewed except in rare cases in which a conflicting application, a petition to
deny, a complaint or an adverse finding as to the licensee's qualifications
results in loss of the license. The company believes it is in substantial
compliance with all applicable provisions of the Communications Act and FCC
Regulations.
FCC Regulations also prohibit concentrations of broadcasting control and
regulate network programming. FCC Regulations governing multiple ownership
limit, or in some cases, prohibit the common ownership or control of most
communications media serving common market areas (for example, television and
radio; television and daily newspapers; radio and daily newspapers; or
television and cable television). The FCC's broadcast ownership rules permit
common ownership of two television stations in the same market, provided eight
independently owned television stations remain in the market following the
combination and provided that at least one of the commonly owned stations is not
among the market's top four rated stations. It is under this standard that the
company acquired a second television station in the Jacksonville, Fla., market
in March 2000. The FCC has instituted a rule-making proceeding to examine
possible modifications to the daily newspaper/television broadcast ownership
restrictions.
The FCC rules permit common ownership of a number (depending on market
size) of radio stations and television stations serving the same community but
continue to prohibit a party from having attributable interests in television
stations which collectively reach more than 35 percent of all U.S. television
households. The FCC will continue to review this limitation as required by
Congress. Presently, the company's 22 television stations reach an aggregate of
17.5% of U.S. TV households.
Additional information about the company's television stations may be found
on page 73 of this annual report.
- 62 -
Corporate facilities
The company leases office space for its headquarters in Arlington, Va., and
also owns data processing facilities in nearby Maryland. The present lease will
expire in 2001. In September 1996, the company purchased 30 acres of land in
Fairfax County, Va., for use as a future site for USA TODAY and corporate
headquarters. Building construction began in 1999 and is scheduled to be
completed in mid 2001.
Employee relations
At the end of 2000, the company and its subsidiaries had approximately
53,400 full-time and part-time employees. Four of the company's newspapers were
published in 2000 together with non-company newspapers pursuant to joint
operating agreements, and the employment numbers above include the company's
pro-rata share of employees at those joint production and business operations.
Approximately 14% of those employed by the company and its subsidiaries are
represented by labor unions. They are represented by 91 local bargaining units
affiliated with nine international unions under collective bargaining
agreements. These agreements conform generally with the pattern of labor
agreements in the newspaper and broadcasting industries. The company does not
engage in industrywide or companywide bargaining. The company's UK subsidiaries
bargain with two unions over wages and health and safety issues only. The
company strives to maintain good relationships with its employees.
On July 13, 1995, approximately 2,500 workers from six unions began a
strike against The Detroit News, the Detroit Newspaper Agency and the Detroit
Free Press, the company's agency partner. The strike was precipitated by
unrealistic and excessive demands by the unions for wage increases and position
levels.
Throughout the strike and despite union efforts to stop delivery of the
newspapers through intimidation and violence, the newspapers published every
day. The strike ended in mid February 1997 when six striking unions made an
unconditional offer to return to work. The unions, however, continued to attempt
a subscriber and advertiser boycott. In February 1999 the Detroit Typographical
Union reached a 10-year labor agreement with the company and in January 2001 the
remaining five formerly striking unions also reached labor agreements with the
employers and agreed to cease their boycott attempts and participate in a
program to increase the circulation of the newspapers.
The company provides competitive group life and medical insurance programs
for full-time domestic employees at each location. The company pays a
substantial portion of these costs and employees contribute the balance.
Virtually all of the company's units provide retirement or profit-sharing plans
which cover eligible full-time employees.
In 1990, the company established a 401(k) Savings Plan, which is available
to most of its domestic non-union employees.
- 63 -
Acquisitions and dispositions 1996-2000
The growth of the company has resulted from acquisitions of businesses, as well
as from internal expansion. Its significant acquisitions since the beginning of
1996 are shown below. The company has disposed of several businesses during this
period, which are presented on the following page.
Acquisitions 1996-2000
Year acquired Name Location Publication times or business
- ------------- ----------------------------- ------------------------------- -----------------------------
1996 WTSP-TV Tampa-St. Petersburg, Fla. Television station
1997 WZZM-TV Grand Rapids, Mich. Television station
WGRZ-TV Buffalo, N.Y. Television station
Printed Media Companies Minneapolis, Minn. Commercial printing
KNAZ-TV Flagstaff, Ariz. Television station
KMOH-TV Kingman, Ariz. Television station
Mary Morgan, Inc. Green Bay, Wis. Commercial printing
Army Times Publishing Co., Inc. Springfield, Va. Weekly and monthly periodicals
New Jersey Press, Inc. Asbury Park and East Brunswick, N.J. Two daily newspapers
1998 WCSH-TV Portland, Maine Television station
WLBZ-TV Bangor, Maine Television station
WLTX-TV Columbia, S.C. Television station
Ocean County Observer Toms River, N.J. Daily newspaper
Daily Record Morristown, N.J. Daily newspaper
Manahawkin Newspapers Manahawkin, N.J. Weekly newspapers
Classified Gazette San Rafael, Calif. Semi-weekly newspaper
New Castle County Shopper's Guide Wilmington, Del. Weekly advertising shopper
Brandywine Valley Weekly Wilmington, Del. Weekly advertising shopper
Autos plus Wilmington, Del. Weekly advertising shopper
TCI Cable Kansas Kansas Cable television systems
1999 The Reporter Melbourne, Fla. Weekly newspaper
Lehigh Acres News-Star Lehigh Acres, Fla. Weekly newspaper
Dealer Magazine Reno, Nev. Weekly magazine
KXTV-TV Sacramento, Calif. Television station
Newsquest plc United Kingdom Daily and weekly newspapers
Tucker Communications, Inc. Westchester Co., N.Y. Weekly newspaper
Pennypower Shopping News Branson & Springfield, Mo. Weekly newspaper
2000 The Pioneer Republican and Des Moines, Iowa Weekly newspapers
other publications
Buyers' Digest Franklin County, Vt. Weekly newspaper
The Clarion Redcar, United Kingdom Weekly newspaper
WJXX-TV Jacksonville, Fla. Television station
Mason Valley News, Lyon County, Nev. Weekly newspapers
Fernley Leader-Dayton Courier
Brevard Technical Journal Brevard County, Fla. Monthly magazine
Dickson Shoppers Middle Tennessee Weekly newspapers
Greenville Parent Magazine Greenville County, S.C. Monthly magazine
News Communications & Media plc United Kingdom Daily and weekly newspapers and
other publications
Space Coast Press Brevard County, Fla. Weekly newspaper
Certain assets of Wisconsin, Ohio, Louisiana, 19 daily and numerous
Thomson Newspapers Inc. Maryland, Utah weekly newspapers
Central Newspapers, Inc. Arizona, Indiana, Louisiana 6 daily newspapers; other
related businesses
Daily World Opelousas, La. Daily newspaper
Windsor Beacon Windsor, Colo. Weekly newspaper
50+ Lifestyles and other publications Des Moines, Iowa Monthly magazines
- 64 -
Dispositions 1996-2000
Year disposed Name Location Publication times or business
- ------------- ----------------------------- ------------------------------- -----------------------------
1996 WMAZ/WAYS-FM Macon, Ga. Radio stations
Gannett Outdoor Group Various major markets, Outdoor advertising
U.S. and Canada
Multimedia Entertainment New York, N.Y. Television entertainment
programming
Louis Harris and Associates, Inc. New York, N.Y. Polling and research
Gannett Community Directories Paramus, N.J. Community directories
KIIS/KIIS-FM Los Angeles, Calif. Radio stations
KSDO/KKBH-FM San Diego, Calif. Radio stations
WDAE/WUSA-FM Tampa, Fla. Radio stations
1997 WLWT-TV Cincinnati, Ohio Television station
KOCO-TV Oklahoma City, Okla. Television station
Niagara Gazette Niagara Falls, N.Y. Daily newspaper
The Observer Moultrie, Ga. Daily newspaper
North Hills News Record North Hills, Pa. Daily newspaper
Valley News Dispatch Tarentum, Pa. Daily newspaper
1998 The Virgin Islands Daily News St. Thomas, V.I. Daily newspaper
WGCI/WGCI-FM Chicago, Ill. Radio stations
KKBQ/KKBQ-FM Houston, Texas Radio stations
KHKS-FM Dallas, Texas Radio station
The Saratogian Saratoga Springs, N.Y. Daily newspaper
Multimedia Security Service Wichita, Kan. Alarm security business
Commercial-News Danville, Ill. Daily newspaper
Chillicothe Gazette Chillicothe, Ohio Daily newspaper
Gallipolis Daily Tribune Gallipolis, Ohio Daily newspaper
The Daily Sentinel Pomeroy, Ohio Daily newspaper
Point Pleasant Register Point Pleasant, W.Va. Daily newspaper
Multimedia Cable Illinois Suburban Chicago, Ill. Cable television systems
1999 The San Bernardino County Sun San Bernardino, Calif. Daily newspaper
KVUE-TV Austin, Texas Television station
2000 Multimedia Cable Kansas, Oklahoma, North Carolina Cable television systems
Marin Independent Journal Marin, Calif. Daily newspaper
Classified Gazette San Rafael, Calif. Semi-weekly newspaper
Space News Springfield, Va. Weekly newspaper
- 65 -
Quarterly statements of income
In thousands of dollars
Fiscal year ended December 31, 2000 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
----------- ----------- ----------- ----------- -----------
Net operating revenues
Newspaper advertising $ 830,250 $ 911,949 $ 1,004,280 $ 1,226,457 $ 3,972,936
Newspaper circulation 254,146 251,524 286,890 328,431 1,120,991
Broadcasting 166,789 205,413 183,352 233,213 788,767
All other 70,135 78,921 83,998 106,570 339,624
----------- ----------- ----------- ----------- -----------
Total 1,321,320 1,447,807 1,558,520 1,894,671 6,222,318
----------- ----------- ----------- ----------- -----------
Operating expenses
Cost of sales and operating
expenses, exclusive of depreciation 667,486 683,084 788,209 918,473 3,057,252
Selling, general and administrative expenses,
exclusive of depreciation 215,942 227,593 245,735 282,625 971,895
Depreciation 46,608 47,070 51,509 50,241 195,428
Amortization of intangible assets 33,766 35,379 52,082 59,260 180,487
----------- ----------- ----------- ----------- -----------
Total 963,802 993,126 1,137,535 1,310,599 4,405,062
----------- ----------- ----------- ----------- -----------
Operating income 357,518 454,681 420,985 584,072 1,817,256
Non-operating (expense) income
Interest expense (20,175) (22,666) (75,962) (100,425) (219,228)
Other (1,326) 7,947 (260) 4,451 10,812
----------- ----------- ----------- ----------- -----------
Total (21,501) (14,719) (76,222) (95,974) (208,416)
----------- ----------- ----------- ----------- -----------
Income before income taxes 336,017 439,962 344,763 488,098 1,608,840
Provision for income taxes 133,000 174,200 136,500 193,200 636,900
----------- ----------- ----------- ----------- -----------
Income from continuing operations 203,017 265,762 208,263 294,898 971,940
Discontinued operations
Income from discontinued operations, net 2,437 2,437
Gain on sale of cable business, net of tax 744,700 744,700
----------- ----------- ----------- ----------- -----------
Net income $ 950,154 $ 265,762 $ 208,263 $ 294,898 $ 1,719,077
=========== =========== =========== =========== ===========
Basic earnings per share
Basic earnings from continuing operations (1) $ .74 $ 1.01 $ .79 $ 1.12 $ 3.65
Basic earnings from discontinued operations:
Discontinued operations, net of tax .01 .01
Gain on sale of cable business, net of tax (1) 2.72 2.79
----------- ----------- ----------- ----------- -----------
Net income per share - basic (1) $ 3.47 $ 1.01 $ .79 $ 1.12 $ 6.45
=========== =========== =========== =========== ===========
Diluted earnings per share
Diluted earnings from continuing operations (1) $ .74 $ 1.00 $ .79 $ 1.11 $ 3.63
Diluted earnings from discontinued operations:
Discontinued operations, net of tax .01 .01
Gain on sale of cable business, net of tax (1) 2.69 2.77
----------- ----------- ----------- ----------- -----------
Net income per share - diluted (1) $ 3.44 $ 1.00 $ .79 $ 1.11 $ 6.41
=========== =========== =========== =========== ===========
(1) As a result of rounding and share repurchases made during the year, the
total of the four quarters' earnings per share does not equal the earnings per
share for the year.
Note: The statements of income reflect the classification change made to report
the operating results from the company's 50% owned joint operating agencies on
the equity method of accounting (as a net amount in other operating revenue).
- 66 -
Quarterly statements of income
In thousands of dollars
Fiscal year ended December 26, 1999 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
----------- ----------- ----------- ----------- -----------
Net operating revenues
Newspaper advertising $ 676,204 $ 744,848 $ 776,117 $ 918,081 $ 3,115,250
Newspaper circulation 240,390 236,024 243,085 251,615 971,114
Broadcasting 161,194 194,480 166,770 206,198 728,642
All other 64,892 63,690 67,536 84,238 280,356
----------- ----------- ----------- ----------- -----------
Total 1,142,680 1,239,042 1,253,508 1,460,132 5,095,362
----------- ----------- ----------- ----------- -----------
Operating expenses
Cost of sales and operating
expenses, exclusive of depreciation 597,490 584,728 623,388 654,143 2,459,749
Selling, general and administrative expenses,
exclusive of depreciation 182,969 185,903 201,929 221,620 792,421
Depreciation 42,715 42,130 44,325 40,290 169,460
Amortization of intangible assets 22,914 23,170 30,500 34,047 110,631
----------- ----------- ----------- ----------- -----------
Total 846,088 835,931 900,142 950,100 3,532,261
----------- ----------- ----------- ----------- -----------
Operating income 296,592 403,111 353,366 510,032 1,563,101
Non-operating (expense) income
Interest expense (16,592) (13,852) (26,474) (37,701) (94,619)
Other 2,368 55,305 (2) 1,588 (556) 58,705 (2)
----------- ----------- ----------- ----------- -----------
Total (14,224) 41,453 (24,886) (38,257) (35,914)
----------- ----------- ----------- ----------- -----------
Income before income taxes 282,368 444,564 328,480 471,775 1,527,187
Provision for income taxes 112,400 176,950 130,700 187,750 607,800
----------- ----------- ----------- ----------- -----------
Income from continuing operations 169,968 267,614 (2) 197,780 284,025 919,387 (2)
Discontinued operations
Income from discontinued operations, net 8,925 9,356 9,699 10,561 38,541
Gain on sale of cable business, net of tax
----------- ----------- ----------- ----------- -----------
Net income $ 178,893 $ 276,970 (2) $ 207,479 $ 294,586 $ 957,928 (2)
=========== =========== =========== =========== ===========
Basic earnings per share
Basic earnings from continuing operations $ .61 $ .96 (2) $ .70 $ 1.02 $ 3.29 (2)
Basic earnings from discontinued operations:
Discontinued operations, net of tax .03 .03 .04 .04 .14
Gain on sale of cable business, net of tax
----------- ----------- ----------- ----------- -----------
Net income per share - basic $ .64 $ .99 (2) $ .74 $ 1.06 $ 3.43 (2)
=========== =========== =========== =========== ===========
Diluted earnings per share
Diluted earnings from continuing operations (1) $ .61 $ .95 (2) $ .70 $ 1.01 $ 3.26 (2)
Diluted earnings from discontinued operations:
Discontinued operations, net of tax .03 .03 .04 .04 .14
Gain on sale of cable business, net of tax
----------- ----------- ----------- ----------- -----------
Net income per share - diluted (1) $ .64 $ .98 (2) $ .74 $ 1.05 $ 3.40 (2)
=========== =========== =========== =========== ===========
Earnings summary, excluding non-recurring net non-operating gains
In thousands of dollars
Fiscal year ended December 26, 1999 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
----------- ----------- ----------- ----------- -----------
Income from continuing operations, as reported $ 169,968 $ 267,614 $ 197,780 $ 284,025 $ 919,387
Less: after-tax gains on sale/exchange
of businesses (2) 32,780 32,780
----------- ----------- ----------- ----------- -----------
Income from continuing operations, as adjusted $ 169,968 $ 234,834 $ 197,780 $ 284,025 $ 886,607
=========== =========== =========== =========== ===========
Diluted earnings per share from continuing
operations, as adjusted (1) $ .61 $ .84 $ .70 $ 1.01 $ 3.15
=========== =========== =========== =========== ===========
(1) As a result of rounding, the total of the four quarters' earnings per
share does not equal the earnings per share for the year.
(2) Includes second quarter net gain principally from the exchange of
KVUE-TV in Austin, Texas, for KXTV-TV in Sacramento, Calif., ($55
million pre-tax, $33 million after-tax, $.11 per share-basic and
diluted).
Note: The statements of income reflect the classification change made to
report the operating results from the company's 50% owned joint operating
agencies on the equity method of accounting (as a net amount in other
operating revenue).
- 67 -
Schedules to Form 10-K information
In thousands of dollars
Property, plant and equipment
Balance at
beginning Additions Retirements Balance at
Classification of period at cost or sales Other changes end of period
------------ ---------- ----------- ------------- -------------
Dec. 27, 1998
Land $ 175,884 $ 7,769 $ 987 $ (1,880) $ 180,786
Buildings and improvements 840,157 10,022 13,790 2,821 839,210
Cable and security systems 548,219 24,218 159,634 256 413,059
Machinery, equipment and fixtures 2,140,148 126,006 140,424 (2,262) 2,123,468
Construction in progress and
deposits on contracts 50,429 58,859 133 1,065 110,220
---------- --------- --------- ----------- ----------
$3,754,837 $ 226,874 (A)(E) $ 314,968 $ 0 $3,666,743
========== ========= ========= =========== ==========
Dec. 26, 1999
Land $ 180,786 $ 5,901 $ 4,853 $ 304 $ 182,138
Buildings and improvements 839,210 83,975 37,189 659 886,655
Cable 413,059 13,680 1,821 (11) 424,907
Machinery, equipment and fixtures 2,123,468 308,547 171,525 (1,128) 2,259,362
Construction in progress and
deposits on contracts 110,220 21,810 1,318 138 130,850
---------- --------- --------- ----------- ----------
$3,666,743 $ 433,913 (B)(E) $ 216,706 $ (38) (D) $3,883,912
========== ========= ========= =========== ==========
Dec. 31, 2000
Land $ 182,138 $ 33,066 $ 4,374 $ 5,219 $ 216,049
Buildings and improvements 886,655 183,971 20,639 51,709 1,101,696
Cable 424,907 4 424,911 0 0
Machinery, equipment and fixtures 2,259,362 451,276 107,822 (77,634) 2,525,182
Construction in progress and
deposits on contracts 130,850 153,383 223 8,264 292,274
---------- --------- --------- ----------- ----------
$3,883,912 $ 821,700 (C)(E) $ 557,969 $ (12,442)(D) $4,135,201
========== ========= ========= =========== ==========
Notes
(A) Includes assets at acquisition net of adjustments for prior years' acquisitions. $ (17,551)
(B) Includes assets at acquisition net of adjustments for prior years' acquisitions. $ 175,470
(C) Includes assets at acquisition net of adjustments for prior years' acquisitions. $ 471,120
(D) Principally the effect of current foreign currency translation adjustment.
(E) Includes capitalized interest of $1,610 in 1998, $5,707 in 1999 and $11,167
in 2000.
(F) Generally the rates of depreciation range from 2.5% to 10% for buildings and
improvements, 3.3% to 20% for cable and 4% to 30% for machinery, equipment and fixtures.
(G) Includes depreciation expense from cable and security reflected in earnings
from discontinued operations of $2,759 in 2000, $31,806 in 1999 and $37,907
in 1998.
- 68 -
Schedules to Form 10-K information
In thousands of dollars
Accumulated depreciation and amortization of property, plant and equipment
Additions
Balance at charged
beginning to costs and Retirements Other Balance at
of period expenses or sales changes end of period
---------- --------- --------- ---------- ----------
Dec. 27, 1998
Buildings and improvements $ 324,080 $ 25,434 $ 12,941 $ 9,318 $ 345,891
Cable 83,106 31,134 36,369 (196) 77,675
Machinery, equipment and fixtures 1,155,609 145,115 112,208 (9,122) 1,179,394
---------- --------- --------- ---------- ----------
$1,562,795 $ 201,683 (F)(G) $ 161,518 $ 0 $1,602,960
========== ========= ========= ========== ==========
Dec. 26, 1999
Buildings and improvements $ 345,891 $ 22,056 $ 16,511 $ (5,003) $ 346,433
Cable 77,675 24,862 1,243 0 101,294
Machinery, equipment and fixtures 1,179,394 154,348 126,421 5,012 1,212,333
---------- --------- --------- ---------- ----------
$1,602,960 $ 201,266 (F)(G) $ 144,175 $ 9 (D) $1,660,060
========== ========= ========= ========== ==========
Dec. 31, 2000
Buildings and improvements $ 346,433 $ 30,371 $ (6,055) $ 4,330 $ 387,189
Cable 101,294 2,697 103,991 0 0
Machinery, equipment and fixtures 1,212,333 165,119 85,976 (4,863) 1,286,613
---------- --------- --------- ---------- ----------
$1,660,060 $ 198,187 (F)(G) $ 183,912 $ (533)(D) $1,673,802
========== ========= ========= ========== ==========
(D)(F)(G) See page 68
Valuation and qualifying accounts
Additions Additions/
Balance at charged (reductions) Balance
beginning to costs and for acquisitions/ Deductions at end
Allowance for doubtful receivables of period expenses dispositions from reserves of period
--------- -------- ------------ ------------- ---------
Year ended Dec. 27, 1998 $18,020 $22,077 $ (1,240) $19,714 $19,143
Year ended Dec. 26, 1999 $19,143 $26,213 $ 9,419 $24,081 $30,694
Year ended Dec. 31, 2000 $30,694 $28,072 $ 10,456 $31,757 $37,465
Supplementary income statement information (from continuing operations)
Fiscal year ended Dec. 31, 2000 Dec. 26, 1999 Dec. 27, 1998
------------- ------------- -------------
Maintenance and repairs $51,424 $42,208 $41,053
------- ------- -------
Taxes other than payroll and income tax
Property $28,074 $23,101 $20,736
Other $12,660 $ 8,243 $ 8,327
------- ------- -------
Total $40,734 $31,344 $29,063
------- ------- -------
- 69 -
MARKETS WE SERVE
NEWSPAPERS AND NEWSPAPER DIVISION
Daily newspapers
State Circulation Joined
Territory City Newspaper Morning Afternoon Sunday Founded Gannett (a)
- --------- ---- --------- ------- --------- ------ ------- -----------
Alabama Montgomery Montgomery Advertiser 53,500 67,042 1829 1995 (64)
Arizona Phoenix The Arizona Republic 469,812 582,371 1890 2000 (93)
Tucson Tucson Citizen 39,543 1870 1976 (31)
Arkansas Mountain Home The Baxter Bulletin 11,345 1901 1995 (65)
California Palm Springs The Desert Sun 52,327 54,917 1927 1986 (58)
Salinas The Californian 19,304 1871 1977 (37)
Tulare Tulare Advance-Register 8,291 1882 1993 (63)
Visalia Visalia Times-Delta 21,836 1859 1977 (38)
Colorado Fort Collins Fort Collins Coloradoan 28,775 35,348 1873 1977 (39)
Connecticut Norwich Norwich Bulletin 28,807 34,334 1791 1981 (51)
Delaware Wilmington The News Journal 122,118 143,113 1871 1978 (44)
Florida Brevard County FLORIDA TODAY 86,980 110,714 1966 1966 (9)
Fort Myers The News-Press 88,159 106,328 1884 1971 (24)
Pensacola Pensacola News Journal 62,817 81,806 1889 1969 (11)
Georgia Gainesville The Times 22,124 26,188 1947 1981 (50)
Guam Hagatna Pacific Daily News 21,482 20,608 1944 1971 (23)
Hawaii Honolulu The Honolulu Advertiser 112,410 186,926 1856 1993 (62)
Idaho Boise The Idaho Statesman 64,573 86,680 1864 1971 (16)
Illinois Rockford Rockford Register Star 70,755 82,074 1855 1967 (10)
- 70 -
Daily newspapers
State Circulation Joined
Territory City Newspaper Morning Afternoon Sunday Founded Gannett (a)
- --------- ---- --------- ------- --------- ------ ------- -----------
Indiana Fishers The Daily Ledger 11,231 1870 2000 (94)
Indianapolis The Indianapolis Star 246,957 363,275 1903 2000 (95)
Lafayette Journal and Courier 37,238 44,225 1829 1971 (17)
Marion Chronicle-Tribune 19,847 22,142 1867 1971 (20)
Muncie The Star Press 33,534 36,429 1899 2000 (96)
Richmond Palladium-Item 19,150 22,858 1831 1976 (30)
Vincennes Vincennes Sun-Commercial 12,149 14,179 1804 2000 (97)
Iowa Des Moines The Des Moines Register 155,930 249,085 1849 1985 (55)
Iowa City Iowa City Press-Citizen 14,897 1860 1977 (41)
Kentucky Louisville The Courier-Journal 231,685 296,546 1868 1986 (60)
Louisiana Alexandria Alexandria Daily Town Talk 36,001 41,772 1883 2000 (98)
Lafayette The Daily Advertiser 44,663 51,866 1865 2000 (74)
Monroe The News-Star 36,708 41,243 1890 1977 (43)
Opelousas Daily World 11,643 12,958 1939 2000 (99)
Shreveport The Times 69,625 85,670 1871 1977 (42)
Maryland Salisbury The Daily Times 27,183 31,118 1900 2000 (75)
Michigan Battle Creek Battle Creek Enquirer 25,725 34,787 1900 1971 (18)
Detroit The Detroit News 237,403 1873 1986 (57)
The Detroit News and Free Press 750,696
Lansing Lansing State Journal 70,171 91,659 1855 1971 (15)
Port Huron Times Herald 30,831 42,729 1900 1970 (12)
Minnesota St. Cloud St. Cloud Times 28,364 38,111 1861 1977 (36)
Mississippi Hattiesburg Hattiesburg American 22,681 27,014 1897 1982 (53)
Jackson The Clarion-Ledger 103,040 119,638 1837 1982 (52)
Missouri Springfield Springfield News-Leader 64,239 93,452 1893 1977 (35)
Montana Great Falls Great Falls Tribune 33,903 39,107 1885 1990 (61)
Nevada Reno Reno Gazette-Journal 67,833 85,156 1870 1977 (32)
New Jersey Asbury Park Asbury Park Press 157,997 220,198 1879 1997 (70)
Bridgewater Courier News 41,354 41,107 1884 1927 (5)
Cherry Hill Courier-Post 83,254 96,579 1875 1959 (7)
East Brunswick Home News Tribune 68,822 76,620 1879 1997 (71)
Morristown Daily Record 44,656 47,386 1900 1998 (72)
Toms River Ocean County Observer 10,055 9,741 1850 1998 (73)
Vineland The Daily Journal 17,548 1864 1986 (59)
New York Binghamton Press & Sun-Bulletin 60,442 76,385 1904 1943 (6)
Elmira Star-Gazette 29,303 41,217 1828 1906 (1)
Ithaca The Ithaca Journal 18,605 1815 1912 (2)
Poughkeepsie Poughkeepsie Journal 40,370 52,895 1785 1977 (34)
Rochester Rochester Democrat and Chronicle 174,676 241,750 1833 1918 (3)
Utica Observer-Dispatch 47,022 57,022 1817 1922 (4)
Westchester County The Journal News 144,309 173,733 1829 1964 (8)
North Carolina Asheville Asheville Citizen-Times 56,408 70,094 1870 1995 (66)
Ohio Bucyrus Telegraph-Forum 7,033 1923 2000 (76)
Cincinnati The Cincinnati Enquirer 202,467 313,864 1841 1979 (45)
Chillicothe Chillicothe Gazette 15,988 15,934 1800 2000 (77)
Coshocton Coshocton Tribune 7,543 7,930 1842 2000 (78)
Fremont The News-Messenger 14,054 1856 1975 (28)
Lancaster Lancaster Eagle-Gazette 15,482 16,056 1807 2000 (79)
Mansfield News Journal 34,656 44,104 1885 2000 (80)
Marietta The Marietta Times 12,073 1864 1974 (27)
Marion The Marion Star 14,818 16,088 1880 2000 (81)
Newark The Advocate 21,350 22,179 1820 2000 (82)
Port Clinton News Herald 5,960 1864 1975 (29)
Zanesville Times Recorder 21,582 22,032 1852 2000 (83)
- 71 -
Daily newspapers
State Circulation Joined
Territory City Newspaper Morning Afternoon Sunday Founded Gannett (a)
- --------- ---- --------- ------- --------- ------ ------- -----------
Oklahoma Muskogee Muskogee Daily Phoenix
and Times-Democrat 19,096 20,091 1888 1977 (40)
Oregon Salem Statesman Journal 57,658 66,100 1851 1974 (26)
Pennsylvania Chambersburg Public Opinion 20,660 1869 1971 (14)
Lansdale The Reporter 18,532 1870 1980 (49)
South Carolina Greenville The Greenville News 99,020 133,503 1874 1995 (67)
South Dakota Sioux Falls Argus Leader 52,828 74,763 1881 1977 (33)
Tennessee Clarksville The Leaf-Chronicle 21,823 25,821 1808 1995 (68)
Jackson The Jackson Sun 37,678 42,844 1848 1985 (56)
Nashville The Tennessean 185,230 263,268 1812 1979 (46)
Texas El Paso El Paso Times 76,848 95,659 1879 1972 (25)
Utah St. George The Spectrum 21,461 22,552 1963 2000 (84)
Vermont Burlington The Burlington Free Press 50,809 61,838 1827 1971 (13)
Virginia Arlington USA TODAY 2,284,024 1982 1982 (54)
Staunton The Daily News Leader 18,583 21,549 1904 1995 (69)
Washington Bellingham The Bellingham Herald 24,496 31,383 1890 1971 (21)
Olympia The Olympian 38,546 44,923 1889 1971 (19)
West Virginia Huntington The Herald-Dispatch 35,469 41,361 1909 1971 (22)
Wisconsin Appleton The Post-Crescent 54,901 71,511 1853 2000 (85)
Fond du Lac The Reporter 18,330 20,476 1870 2000 (86)
Green Bay Green Bay Press-Gazette 56,647 82,713 1915 1980 (47)
Manitowoc Herald Times Reporter 16,455 16,805 1898 2000 (87)
Marshfield Marshfield News-Herald 14,581 1927 2000 (88)
Oshkosh Oshkosh Northwestern 22,806 26,637 1868 2000 (89)
Sheboygan The Sheboygan Press 24,550 26,615 1907 2000 (90)
Stevens Point Stevens Point Journal 13,548 1873 2000 (91)
Central Wisconsin Sunday 16,640
Wausau Wausau Daily Herald 22,819 30,305 1903 1980 (48)
Wisconsin Rapids Daily Tribune 13,749 1914 2000 (92)
(a) Number in parentheses notes chronological order in which existing newspapers joined Gannett.
Army Times Publishing Co.
Headquarters: Springfield, Va.
Publications: Army Times, Navy Times, Marine Corps Times, Air Force Times,
Federal Times, Defense News
Nursing Spectrum
Offices: Falls Church, Va. (serving Washington, D.C./Baltimore); Hoffman
Estates, Ill. (serving Illinois and Indiana); Ft. Lauderdale, Fla. (serving Ft.
Lauderdale and Tampa); King of Prussia, Pa. (serving Philadelphia and the
Delaware Valley); Westbury, N.Y. (serving New York and New Jersey); Lexington,
Mass. (serving New England states)
Non-daily publications
Weekly, semi-weekly or monthly publications in Alabama, Arizona, Arkansas,
California, Colorado, Connecticut, Delaware, Florida, Georgia, Guam, Hawaii,
Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan,
Minnesota, Mississippi, Missouri, Montana, Nevada, New Jersey, New York, North
Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota,
Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin
and Juarez, Mexico
USA WEEKEND
Circulation 22.7 million in 555 newspapers
Headquarters: Arlington, Va.
Advertising offices: Chicago; Detroit; Los Angeles; New York
Gannett Media Technologies International Cincinnati, Ohio
Gannett Offset
Headquarters: Springfield, Va.
Offset sites: Atlanta, Ga.; Chandler, Ariz.; Minneapolis, Minn.; Miramar, Fla.;
Nashville, Tenn.; Norwood, Mass.; Olivette, Mo.; Pensacola, Fla.;
Springfield, Va.
Gannett Offset Marketing Services Group
Gannett Direct Marketing Services, Inc. Louisville, Ky.
Gannett TeleMarketing, Inc.
Headquarters: Springfield, Va.
Operations: Cambridge, Mass.; Cincinnati, Ohio; Columbia, Mo.;
Louisville, Ky.; Nashville, Tenn.; Silver Spring, Md.; Towson, Md.
Telematch Springfield, Va.
Gannett Retail Advertising Group Chicago, Ill.
Gannett Satellite Information Network Arlington, Va.
Gannett News Service
Headquarters: Arlington, Va.
Bureaus: Albany, N.Y.; Baton Rouge, La.; Columbus, Ohio; Harrisburg, Pa.;
Indianapolis, Ind.; Sacramento, Calif.; Springfield, Ill.; Tallahassee, Fla.
- 72 -
USA TODAY
Headquarters: Arlington, Va.
Print sites: Arlington, Texas; Atlanta; Batavia, N.Y.; Brevard County,
Fla.; Chandler, Ariz.; Chicago; Columbia, S.C.; Fort Collins, Colo.; Fort Myers,
Fla.; Gainesville, Ga.; Hattiesburg, Miss.; Kankakee, Ill.; Lansing, Mich.; Las
Vegas, Nev.; Lawrence, Kan.; Mansfield, Ohio; Marin County, Calif.; Miramar,
Fla.; Nashville, Tenn.; Newark, Ohio; Norwood, Mass.; Olympia, Wash.; Pasadena,
Texas; Port Huron, Mich.; Raleigh, N.C.; Richmond, Ind.; Rockaway, N.J.; St.
Cloud, Minn.; St. Louis; Salisbury, N.C.; Salt Lake City; San Bernardino,
Calif.; Springfield, Va.; Tarentum, Pa.; White Plains, N.Y.; Wilmington, Del.
International print sites: Charleroi, Belgium; Frankfurt, Germany; Hong
Kong; London, England; Milan, Italy
Regional offices: Atlanta; Boston; Buffalo, N.Y.; Charlotte, N.C.; Chicago;
Cincinnati; Cleveland; Columbus, Ohio; Dallas; Denver; Detroit; Houston;
Indianapolis; Kansas City, Mo.; Las Vegas; Los Angeles; Milwaukee;
Minneapolis-St. Paul; Miramar, Fla.; Mountainside, N.J.; Nashville, Tenn.; New
Orleans; Orlando, Fla.; Philadelphia; Phoenix, Ariz.; Pittsburgh; Port
Washington, N.Y.; St. Louis; San Francisco; Seattle; Springfield, Va.
International offices: Hong Kong; London, England; Paris, France; Singapore
Advertising offices: Arlington, Va.; Atlanta; Chicago; Dallas; Detroit;
London, England; Los Angeles; New York; San Francisco
USA TODAY Baseball Weekly
Editorial and advertising offices: Arlington, Va.
USATODAY.com Arlington, Va.
BROADCASTING
Television stations
Weekly Joined
State City Station Channel/Network Audience * Founded Gannett
- ----- ---- ------- --------------- ---------- ------- -------
Arizona Flagstaff KNAZ-TV Channel 2/NBC ** 1970 1997
Kingman KMOH-TV Channel 6/NBC ** 1988 1997
Phoenix KPNX-TV Channel 12/NBC 1,209,000 1953 1979
Arkansas Little Rock KTHV-TV Channel 11/CBS 377,000 1955 1994
California Sacramento KXTV-TV Channel 10/ABC 1,039,000 1955 1999
Colorado Denver KUSA-TV Channel 9/NBC 1,235,000 1952 1979
District
of Columbia Washington WUSA-TV Channel 9/CBS 1,857,000 1949 1986
Florida Jacksonville WJXX-TV Channel 25/ABC 388,000 1989 2000
WTLV-TV Channel 12/NBC 459,000 1957 1988
Tampa-St. Petersburg WTSP-TV Channel 10/CBS 1,212,000 1965 1996
Georgia Atlanta WXIA-TV Channel 11/NBC 1,578,000 1948 1979
Macon WMAZ-TV Channel 13/CBS 208,000 1953 1995
Maine Bangor WLBZ-TV Channel 2/NBC 123,000 1954 1998
Portland WCSH-TV Channel 6/NBC 334,000 1953 1998
Michigan Grand Rapids WZZM-TV Channel 13/ABC 394,000 1962 1997
Minnesota Minneapolis-St. Paul KARE-TV Channel 11/NBC 1,354,000 1953 1983
Missouri St. Louis KSDK-TV Channel 5/NBC 1,086,000 1947 1995
New York Buffalo WGRZ-TV Channel 2/NBC 503,000 1954 1997
North Carolina Greensboro WFMY-TV Channel 2/CBS 545,000 1949 1988
Ohio Cleveland WKYC-TV Channel 3/NBC 1,399,000 1948 1995
South Carolina Columbia WLTX-TV Channel 19/CBS 245,000 1953 1998
Tennessee Knoxville WBIR-TV Channel 10/NBC 434,000 1956 1995
* Weekly audience is number of TV households reached, according to the November
2000 Nielsen book.
** Audience numbers fall below minimum reporting standards.
- 73 -
NEWSQUEST PLC
Daily newspapers
Circulation Joined
City Newspaper Morning Afternoon Saturday Founded Gannett
- ---- --------- ------- -------- -------- ------- -------
Basildon Evening Echo 42,372 1969 1999
Blackburn Lancashire Evening Telegraph 42,639 36,634 1886 1999
Bolton Bolton Evening News 41,746 30,708 1867 1999
Bournemouth Daily Echo 43,393 39,321 1900 2000
Bradford Telegraph & Argus 52,977 49,511 1868 1999
Brighton Evening Argus 47,873 44,345 1880 1999
Colchester Evening Gazette 28,761 1970 1999
Darlington The Northern Echo 65,290* 1870 1999
Newport South Wales Argus 34,803 29,807 1892 2000
Oxford Oxford Mail 30,735 28,378 1928 1999
Southampton Southern Daily Echo 58,980 57,178 1888 2000
Swindon Evening Advertiser 25,826 21,495 1854 1999
Weymouth Dorset Echo 20,670 21,070 1921 2000
Worcester Worcester Evening News 22,869 19,106 1937 1999
York Evening Press 42,278* 1882 1999
* Monday-Saturday inclusive
Non-daily publications
North West, Yorkshire, North East, Midlands, South East, South West, Essex,
London, South Coast, South Wales
- 74 -
GANNETT ON THE NET
News and information about Gannett is available on our Web site,
www.gannett.com.
The following Gannett properties also offer online services or
informational sites on the Internet:
Newspapers and Newspaper Division
- ---------------------------------
USA TODAY www.usatoday.com
USA TODAY Baseball Weekly www.totalbaseballweekly.com
USA WEEKEND www.usaweekend.com
Alexandria (La.) Daily Town Talk www.thetowntalk.com
The Post-Crescent, Appleton, Wis. www.wisinfo.com/postcrescent
Asbury Park (N.J.) Press www.app.com
Asheville (N.C.) Citizen-Times www.citizen-times.com
Battle Creek (Mich.) Enquirer www.battlecreekenquirer.com
The Bellingham (Wash.) Herald www.bellinghamherald.com
Press & Sun-Bulletin, Binghamton, N.Y. www.pressconnects.com
FLORIDA TODAY, Brevard County www.flatoday.com
Courier News, Bridgewater, N.J. www.c-n.com
The Idaho Statesman, Boise www.idahostatesman.com
The Burlington (Vt.) Free Press www.burlingtonfreepress.com
Public Opinion, Chambersburg, Pa. www.publicopiniononline.com
Courier-Post, Cherry Hill, N.J. www.courierpostonline.com
The Cincinnati Enquirer enquirer.com
The Leaf-Chronicle, Clarksville, Tenn. www.theleafchronicle.com
The Des Moines Register DesMoinesRegister.com
The Detroit News detnews.com
Home News Tribune, East Brunswick, N.J. www.injersey.com/hnt
Star-Gazette, Elmira, N.Y. www.star-gazette.com
El Paso (Texas) Times www.elpasotimes.com
The Daily Ledger, Fishers, Ind. www.topics.com
The Reporter, Fond du Lac, Wis. www.wisinfo.com/thereporter
Fort Collins Coloradoan www.coloradoan.com
The News-Press, Fort Myers, Fla. www.news-press.com
The News-Messenger, Fremont, Ohio www.thenews-messenger.com
The Times, Gainesville, Ga. www.gainesvilletimes.com
Great Falls (Mont.) Tribune www.greatfallstribune.com
Green Bay (Wis.) Press-Gazette www.greenbaypressgazette.com
The Greenville (S.C.) News greenvilleonline.com
Pacific Daily News, Hagatna, Guam www.guampdn.com
Hattiesburg (Miss.) American www.hattiesburgamerican.com
The Honolulu Advertiser www.honoluluadvertiser.com
The Herald-Dispatch, Huntington, W.Va. www.hdonline.com
The Indianapolis Star www.starnews.com
Iowa City (Iowa) Press-Citizen www.press-citizen.com
The Ithaca (N.Y.) Journal www.theithacajournal.com
The Clarion-Ledger, Jackson, Miss. www.clarionledger.com
The Jackson (Tenn.) Sun www.jacksonsun.com
Journal and Courier, Lafayette, Ind. www.jconline.com
The Reporter, Lansdale, Pa. www.thereporteronline.com
Lansing (Mich.) State Journal www.lsj.com
The Courier-Journal, Louisville, Ky. www.courier-journal.com
The Daily Advertiser, Lafayette, La. www.acadiananow.com
Herald Times Reporter, Manitowoc, Wis. www.wisinfo.com/heraldtimes
The Marietta (Ohio) Times www.mariettatimes.com
Chronicle-Tribune, Marion, Ind. www.chronicle-tribune.com
Marshfield (Wis.) News-Herald www.wisinfo.com/newsherald
The News-Star, Monroe, La. www.thenewsstar.com
The Baxter Bulletin, Mountain Home, Ark. www.baxterbulletin.com
The Montgomery (Ala.) Advertiser www.montgomeryadvertiser.com
Daily Record, Morristown, N.J. www.dailyrecord.com
The Star Press, Muncie, Ind. www.thestarpress.com
The Tennessean, Nashville www.tennessean.com
The Olympian, Olympia, Wash. www.theolympian.com
Daily World, Opelousas, La. www.dailyworld.com
Oshkosh (Wis.) Northwestern www.wisinfo.com/northwestern
The Desert Sun, Palm Springs, Calif. www.thedesertsun.com
Pensacola (Fla.) News Journal www.PensacolaNewsJournal.com
The Arizona Republic, Phoenix www.arizonarepublic.com
News Herald, Port Clinton, Ohio www.portclintonnewsherald.com
Times Herald, Port Huron, Mich. www.thetimesherald.com
Poughkeepsie (N.Y.) Journal www.poughkeepsiejournal.com
Reno (Nev.) Gazette-Journal www.rgj.com
Palladium-Item, Richmond, Ind. www.pal-item.com
Rochester (N.Y.) Democrat and Chronicle www.democratandchronicle.com
Rockford (Ill.) Register Star www.rrstar.com
The Californian, Salinas www.californianonline.com
The Daily Times, Salisbury, Md. www.thedailytimesonline.com
The Sheboygan (Wis.) Press www.wisinfo.com/sheboyganpress
Argus Leader, Sioux Falls, S.D. www.argusleader.com
St. Cloud (Minn.) Times www.sctimes.com
The Spectrum, St. George, Utah www.thespectrum.com
Statesman Journal, Salem, Ore. www.statesmanjournal.com
The Times, Shreveport, La. www.shreveporttimes.com
Springfield (Mo.) News-Leader www.ozarksnow.com
Stevens Point (Wis.) Journal www.wisinfo.com/journal
Ocean County Observer, Toms River, N.J. www.injersey.com/observer
Tucson (Ariz.) Citizen www.tucsoncitizen.com
Tulare (Calif.) Advance-Register www.tulareadvanceregister.com
Observer-Dispatch, Utica, N.Y. www.uticaod.com
Vincennes (Ind.) Sun-Commercial www.vincennes.com
The Daily Journal, Vineland, N.J. www.thedailyjournal.com
Visalia (Calif.) Times-Delta www.visaliatimesdelta.com
Wausau (Wis.) Daily Herald www.wausaudailyherald.com
The Journal News, Westchester County, N.Y. www.thejournalnews.com
The News Journal, Wilmington, Del. www.delawareonline.com
Daily Tribune, Wisconsin Rapids, Wis. www.wisinfo.com/dailytribune
Army Times www.armytimes.com
Navy Times www.navytimes.com
Marine Corps Times www.marinetimes.com
Air Force Times www.airforcetimes.com
Federal Times www.federaltimes.com
Defense News www.defensenews.com
Military City www.militarycity.com
Military Market www.militarymarket.com
Nursing Spectrum www.nursingspectrum.com
Gannett Offset www.gannettoffset.com
Gannett Direct Marketing Services www.gdms.com
Gannett Media Technologies International www.gmti.com
Newsquest plc
- -------------
Newsquest Media Group www.newsquest.co.uk
Evening Echo, Basildon www.thisisessex.co.uk
Lancashire Evening Telegraph, Blackburn www.thisislancashire.co.uk
Bolton Evening News, Bolton www.thisisbolton.co.uk
Daily Echo, Bournemouth www.thisisdorset.net
Telegraph & Argus, Bradford www.thisisbradford.co.uk
Evening Argus, Brighton www.thisisbrightonandhove.co.uk
Evening Gazette,Colchester www.thisisessex.co.uk
The Northern Echo, Darlington www.thisisthenortheast.co.uk
South Wales Argus, Newport www.southwalesargus.co.uk
Oxford Mail, Oxford www.thisisoxfordshire.co.uk
Southern Daily Echo, Southampton www.thisishampshire.net
Evening Advertiser,Swindon www.thisiswiltshire.co.uk
Dorset Echo, Weymouth www.thisisdorset.net
Worcester Evening News, Worcester www.thisisworcestershire.co.uk
Evening Press,York www.thisisyork.co.uk
Broadcasting
- ------------
WXIA-TV, Atlanta www.11alive.com
WLBZ-TV, Bangor, Maine www.wlbz.com
WGRZ-TV, Buffalo, N.Y. www.wgrz.com
WKYC-TV, Cleveland, Ohio www.wkyc.com
WLTX-TV, Columbia, S.C. www.wltx.com
KUSA-TV, Denver www.9news.com
WZZM-TV, Grand Rapids-Kalamazoo-Battle Creek, Mich. www.wzzm13.com
WFMY-TV, Greensboro, N.C. www.wfmy2.com
WTLV-TV/WJXX-TV, Jacksonville, Fla. www.firstcoastnews.com
WBIR-TV, Knoxville, Tenn. www.wbir.com
KTHV-TV, Little Rock, Ark. www.kthv.com
WMAZ-TV, Macon, Ga. www.13wmaz.com
KARE-TV, Minneapolis-St. Paul www.kare11.com
KPNX-TV, Phoenix, Ariz. www.12news.com
WCSH-TV, Portland, Maine www.wcsh6.com
KXTV-TV, Sacramento, Calif. www.kxtv.com
KSDK-TV, St. Louis, Mo. www.ksdk.com
WTSP-TV, Tampa-St. Petersburg, Fla. www.wtsp.com
WUSA-TV, Washington, D.C. www.wusatv9.com
- 75 -
Glossary of Financial Terms
Presented below are definitions of certain key financial and operational
terms that we hope will enhance your reading and understanding of Gannett's 2000
Annual Report.
Advertising linage - Measurement term for the volume of space sold as
advertising in the company's newspapers; refers to number of column inches, with
each newspaper page composed of six columns.
Balance sheet - A summary statement that reflects the company's assets,
liabilities and shareholders' equity at a particular point in time.
Broadcasting revenues - Primarily amounts charged to customers for commercial
advertising aired on the company's television stations as well as radio stations
prior to 1998.
Circulation - The number of newspapers sold to customers each day ("paid
circulation"). The company keeps separate records of morning, evening and Sunday
circulation.
Circulation revenues - Amounts charged to newspaper readers or distributors.
Charges vary from city to city and depend on the type of sale (i.e.,
subscription or single copy) and distributor arrangements.
Comprehensive income - The change in equity (net assets) of the company from
transactions and other events from non-owner sources. Comprehensive income
comprises net income and other items previously reported directly in
shareholders' equity, principally foreign currency translation adjustment.
Current assets - Cash and other assets that are expected to be converted to cash
within one year.
Current liabilities - Amounts owed that will be paid within one year.
Depreciation - A charge against the company's earnings that allocates the cost
of property, plant and equipment over the estimated useful lives of the assets.
Discontinued operation -A principal business that has been sold and is reported
separately from continuing operations in the statement of income.
Dividend - Payment by the company to its shareholders of a portion of its
earnings.
Earnings per share (basic) - The company's earnings divided by the average
number of shares outstanding for the period.
Earnings per share (diluted) - The company's earnings divided by the average
number of shares outstanding for the period, giving effect to assumed dilution
from outstanding stock options and stock incentive rights.
Excess of acquisition cost over fair value of assets acquired -In a business
purchase, this represents the excess of amounts paid over fair value of tangible
assets acquired (also referred to as intangible assets or goodwill). Generally
this cost is written off against operations over periods of up to 40 years.
(Also see "Purchase.")
Inventories - Raw materials, principally newsprint, used in the business.
Newspaper advertising revenues - Amounts charged to customers for space
("advertising linage") purchased in the company's newspapers. There are three
major types of advertising revenue: retail ads from local merchants, such as
department stores; classified ads, which include automotive, real estate and
"help wanted"; and national ads, which promote products or brand names on a
nationwide basis.
Operating cash flow - Operating income adjusted for major non-cash expenses,
depreciation and amortization of intangible assets.
Pro forma - A manner of presentation intended to improve comparability of
financial results; it assumes business purchases/ dispositions were completed at
the beginning of the earliest period discussed (i.e., results are compared for
all periods but only for businesses presently owned).
Purchase - A business acquisition. The acquiring company records at its cost the
acquired assets less liabilities assumed. The reported income of an acquiring
company includes the operations of the acquired company from the date of
acquisition.
Results of continuing operations - A key section of the statement of income
which presents operating results for the company's principal ongoing businesses
(newspaper and broadcasting).
Retained earnings - The earnings of the company not paid out as dividends to
shareholders.
Statement of cash flows -A financial statement that reflects cash flows from
operating, investing and financing activities, providing a comprehensive view of
changes in the company's cash and cash equivalents.
Statement of changes in shareholders' equity -A statement that reflects changes
in the common stock, retained earnings and other equity accounts.
Statement of income -A financial statement that reflects the company's profit by
measuring revenues and expenses.
Stock incentive rights -An award that gives key employees the right to receive
shares of the company's stock without payment at the end of an incentive period,
conditioned on their continued employment throughout the incentive period.
Stock option - An award that gives key employees the right to buy shares of the
company's stock at the market price of the stock on the date of the award.
- 76 -
Shareholder Services
Gannett stock
- -------------
Gannett Co., Inc. shares are traded on the New York Stock Exchange with the
symbol GCI.
The company's transfer agent and registrar is Wells Fargo Bank Minnesota,
N.A. General inquiries and requests for enrollment materials for the programs
described below should be directed to Wells Fargo Shareowner Services, P.O. Box
64854, St. Paul, MN 55164-0854 or by telephone at 1-800-778-3299.
Gannett is pleased to offer the following shareholder services:
Dividend reinvestment plan
- --------------------------
The Dividend Reinvestment Plan (DRP) provides Gannett shareholders the
opportunity to purchase additional shares of the company's common stock free of
brokerage fees or service charges through automatic reinvestment of dividends
and optional cash payments. Cash payments may range from a minimum of $10 to a
maximum of $5,000 per month.
Automatic cash investment service for the DRP
- ---------------------------------------------
This service provides a convenient, no-cost method of having money
automatically withdrawn from your checking or savings account each month and
invested in Gannett stock through your DRP account.
Direct deposit service
- ----------------------
Gannett shareholders may have their quarterly dividends electronically
credited to their checking or savings accounts on the payment date at no
additional cost.
Form 10-K
- ---------
Information provided by Gannett in its Form 10-K annual report to the
Securities and Exchange Commission has been incorporated in this report. Copies
of the complete Form 10-K annual report may be obtained by writing the
Secretary, Gannett Co., Inc., 1100 Wilson Blvd., Arlington, VA 22234.
Annual meeting
- --------------
The annual meeting of shareholders will be held at 10 a.m. Tuesday,
May 8, 2001 at Gannett headquarters.
For more information
- --------------------
News and information about Gannett is available on our Web site
(www.gannett.com). Quarterly earnings information will be available
around the middle of April, July and October 2001.
Shareholders who wish to contact the company directly about their
Gannett stock should call Shareholder Services at Gannett headquarters,
703-284-6960.
Gannett Headquarters
1100 Wilson Boulevard
Arlington, VA 22234
703-284-6000
-77-